NEW YORK — A jury convicted Adelphia Communications Corp. founder John Rigas and son Timothy on charges of conspiracy and securities fraud Thursday, finding the two deceived investors about the financial condition of the cable television company before it collapsed into bankruptcy.
In a partial verdict delivered in federal court in lower Manhattan, the jury acquitted a second son, Michael, of conspiracy, but had not been able to reach a decision on bank and securities fraud. The judge ordered the jury to resume deliberations this morning.
Former Adelphia assistant treasurer Michael Mulcahey, the only defendant on trial outside the Rigas family, was acquitted of all charges.
Decision is a massive blow to the Rigases, who founded Adelphia to pipe broadcast television to rural Coudersport, Pa., in 1952 and built it into a multibillion-dollar corporation before loading it with $2.3 billion in personal loans hidden from investors. When the loans were revealed to the public, the company’s shares plunged, triggering the bankruptcy in 2002.
Each of the counts carry prison terms of up to 20 years, making it likely that John Rigas, the 79-year-old cable pioneer and family patriarch, will spend the rest of his life behind bars.
“The judge can take into consideration age and health,” said Robert Heim, a former SEC official and attorney at Myers & Heim. “However, given the seriousness of the charges John Rigas was convicted of it’s likely he’ll face a long prison sentence.”
Verdict, the first handed down in the myriad corporate accounting fraud cases winding their way through the courts, will likely have a profound effect on the defense strategies of Enron’s Jeff Skilling and Kenneth Lay, WorldCom’s Bernie Ebbers and Tyco’s Dennis Kozlowski.
“It’s going to heavily influence other cases when they see juries willing to convict senior corporate officers for accounting fraud,” Heim said. “It’s got to have them worried.”
John and Tim Rigas were the targets of the most damaging and sensational evidence presented during the four-month trial, including recreational travel on the corporate jet, lavish golf junkets and vacation homes in Cancun and Colorado paid for by Adelphia.
John Rigas’ image as a kindly old man took a blow when the prosecution showed signed invoices overbilling Adelphia when he ran short of cash and a former personal accountant who testified, in tears, that the elder Rigas had hit him up for a $20,000 loan — and never repaid it.
The diminutive, white-haired Rigas listened to the testimony through headphones for the hearing impaired. Twice he was absent from the trial for cancer treatment at the Mayo Clinic.
As for Michael Rigas, 50, there was little evidence showing that he had abused company perks like his brother and father. The defense made a show of the fact that he documented even the smallest business expenses and drove the same Toyota for 10 years, even though his employment contract provided for a new car every year.
When Rigas paid for a cup of coffee for a friend in the courthouse cafeteria, he asked for a receipt.
Jury still out
In order to acquit Rigas of bank and securities fraud, the jury will have to decide that he was not culpable for misleading information given to the Securities and Exchange Commission despite signing the filings as an officer of the company.
The jury acquitted him of the conspiracy charges even though he lived under the same roof with his father and brother in Coudersport.
After the verdicts were read, the Rigases were escorted out of the courtroom without comment and driven away in waiting cars. Experts expect an appeal.
“It’s a bittersweet day,” said Michael Rigas’ attorney Andrew Levander. “We’ll see what happens tomorrow.”