A federal jury asked for additional information in deciding the fate of cable pioneer John Rigas, two sons and a former company executive Wednesday, leaving a filled and fidgeting courtroom without a verdict for the seventh straight day.
The freedom of the 79-year-old family patriarch, sons Michael and Timothy and former exec Michael Mulcahey hang in the balance as the jury decides whether the four looted Adelphia Communications in a scheme that lead to the 2002 collapse of the fifth-largest cable company in the U.S.
News orgs are devoting considerable resources to the case of the shamed execs, which until now has taken a back seat to the trials of higher-profile personalities such as Martha Stewart and ex-Tyco chief Dennis Kozlowski, as well as the indictment of former WorldCom CEO Bernie Ebbers. The indictment of former Enron chief Kenneth Lay Wednesday may further divert attention from the Rigases.
Nevertheless, the alleged Adelphia fraud is one of the largest ever uncovered. What’s more, the company is still controlled by the founding family, which is alleged to have hidden $2.3 billion in debt from investors and stolen another hundred million to support extravagant lifestyles.
“It ranks with Enron and WorldCom frauds in terms of money lost to shareholders, but what sets it apart is there were family members involved in a corporation closely run among father and sons,” said Robert Heim, former SEC official and partner at law firm Myers & Heim.
The case is all the more dramatic given the Horatio Alger-like story of John Rigas, the son of Greek immigrants who founded the cabler in 1952 to pipe broadcast television to rural Coudersport, Pa.
Prosecutors spent considerable time dwelling on the headline-grabbing examples of excess. John Rigas, for example, used a corporate jet to fly a Christmas tree from Coudersport to his daughter in Manhattan. He flew a second tree out when the first was the wrong size.
Rigas is also accused of billing Adelphia for services whenever he needed cash. The only character witness to testify on John Rigas’ behalf admitted that he had stayed in a Rigas-owned condo in Cancun for two days. Rigas billed the company for its use for two weeks.
The prosecution has sought to lump the Rigases together, painting them in broad strokes, but it appears the jury is considering the guilt or innocence of each defendant individually, asking to review evidence specific to John, Tim and Michael.
“Sometimes when prosecutors charge more than one person, juries lump them like they’re all bad apples, but that’s not happening in this case,” Heim said.
Attorneys for Michael Rigas have sought to separate him from his brother and father, portraying him as an operator of cable systems, naive of complex accounting processes and too busy to have engaged in the alleged conspiracy at the center of the case.
Should any one of the 24 charges of bank, wire and securities fraud or conspiracy stick, Judge Leonard Sand will consider the loss to the victims when deciding on a sentence. But since the losses to shareholders are so vast, this too will be a flashpoint for dispute, and fodder for an appeal, experts said.
In deciding a sentence, Sand will hear evidence of losses caused by the alleged crimes not heard by the jury and then make a decision based on sentencing guidelines. The Supreme Court struck down a similar process in state courts.
“If there are convictions, there will be a huge fight over what the loss calculation should be,” said Daniel Horwitz, partner at Carter, Ledyard & Milburn. “It’s anyone’s guess what will happen with those guidelines.”