Adelphia Communications Corporation

Adelphia Communications Corporation was founded in 1952 by brothers John and Gus Rigas; they purchased a cable television franchise based in Coudersport, Pennsylvania for $300. After 20 years in the business, Rigas incorporated the company under the name "Adelphia" which in the Greek language means "brothers". In the upcoming years, the Rigas family combined various cable properties under the company name and made it public. In 1989, the company established Adelphia Media Services which would allow commercial opportunities on local, regional and national levels. Two years after, in 1991, the company created Adelphia Business Solutions subsidiary which provided different types of products to businesses such as, high-speed Internet, phone services, and voice messaging. In 1998, Adelphia reached 2 million users in subscription.[3]

On March 27, 2002, Adelphia officials announced that $2.3 billion unrecorded debt was collected via co-borrowings between Adelphia and other Rigas family entities under the family's private trust, Highland Holdings. Legally, the Rigas entities should have paid the debt, however, if they were not able to, the company would be held accountable.[3] An investigation was launched and later revealed that the Rigas family used the funds to illegitimately purchase personal luxuries. The alleged purchases included Christmas trees, 17 company cars and 3600 acres of timberland purchased for $26 million for their home yard.[4] Rigas resigned from his position as CEO in May 2002 after being indicted for bank fraud, wire fraud, and securities fraud.[5] The Securities and Exchange Commission (SEC) described the scandal as, "one of the most extensive financial frauds ever to take place at a public company."[3]

Trial

A trial for the case was launched. Federal prosecutors proved that the Rigases used complicated cash-management systems to spread money around to various family-owned entities and as a cover for stealing $100 million for themselves. In June 2005, John and Timothy Rigas were found guilty for "looting and debt-hiding". John Rigas was sentenced to 15 years in prison, while Timothy received a sentence of 20 years.[4] On December 14, 2015, Rigas' lawyers announced that he was terminally ill with bladder cancer and had between one and six months to live. Rigas was diagnosed with cancer prior to his conviction and, under his sentencing, could seek compassionate release if he had less than three months to live.[6] Judge Kimba Wood issued an order allowing for Rigas's release on February 19, 2016.[5] As of June 2016, Rigas is well enough to make public appearances.[7]

Former headquarters in Coudersport, completed just as bankruptcy hit. Now used by successor Zito Media

The New York Times noted that this differed considerably from other accounting scandals like Enron and Worldcom, saying "For the one trait that distinguishes the Rigases from virtually every other culprit on Wall Street is that they didn't sell their stock. The evidence suggests less that they intended to defraud than that they intended to hide inconvenient facts until they could be righted. This is also, of course, against the law; it's just a more tragic crime than ordinary looting."[8]

After struggling to find an alternative, Adelphia Corporation filed for bankruptcy on June 26, 2002. Subsequently, the company asked for a $1.5 billion loan to restructure under bankruptcy protection.[9] According to BankruptcyData.com, the company's bankruptcy ranks 12th by assets in the United States history of bankruptcies.[10] A plan for its restructuring was approved on February 25, 2004. According to William Schleyer, then-CEO of the company, "Adelphia’s proposed plan of reorganization is the product of relentless effort and reflects the dedication of Adelphia’s management and bankruptcy teams, and our almost 15,000 employees in 30 states and Puerto Rico who are helping to make Adelphia a better company." Amongst other things, the plan included a full cash payment to possession lenders, bank lenders, joint venture partners and, no payments to claims and equities of the Rigas family.[11]

In July 2006, Adelphia sold its cable operations to Comcast and Time Warner for $17.6 billion in cash and shares in Time Warner's cable unit. Out of that amount, Time Warner shares and $15 billion were planned to be administered to creditors. Following that, Adelphia ceased to do business.[10] The effective date of the Adelphia Plan of Reorganization occurred on February 13, 2007. Time Warner Cable was allowed to distribute approximately $6 billion in shares to Adelphia stakeholders and succeed Adelphia as a publicly traded corporation.[12] The Rigas family established a successor company, Zito Media, to continue to provide cable service in some areas not sold to Time Warner, including most cable systems in Potter County, Pennsylvania.[13]

One previous marker of Adelphia's success before its bankruptcy included its 1999 purchase of the naming rights to a football stadium, Adelphia Coliseum in Nashville, Tennessee. It was built as the home of the Tennessee Titans. Adelphia was not a well-known company in Nashville, and had only a small presence in the area (its subsidiary, Adelphia Business Solutions, a commercial telecommunications provider, was offered as an alternative to the dominant BellSouth). The name was taken off the stadium in 2002 after Adelphia missed a payment and subsequently filed for bankruptcy. It was known as simply "The Coliseum" for four years before becoming LP Field in 2006. Today, it is known as Nissan Stadium.[14]

• Corporate abuse

• Fink, James, "Adelphia Gets Bigger with Purchase of Jones Cable," Business First of Buffalo, August 28, 1989, p. 5.
• "Adelphia to Install Cable As Part of Upgrade," Business First of Buffalo, January 29, 1990, p. 10.
• Mehlman, William, "Adelphia Cash Flow Margin Paces Cable TV Industry," Insiders' Chronicle, August 31, 1992, p. 1.
• "Adelphia Said It Had Agreed to Buy All Cable Systems Owned by WB Cable Assoc., Clear Channels Cable TV and Benjamin Terry Family," Television Digest, November 7, 1994, p. 8.
• Lindstrom, Annie, "Adelphia Sparks CATV Paging Industry," Telephony, January 16, 1995, p. 18.
• "Adelphia Agreed to Buy," Television Digest, June 19, 1995, p. 7.
• Fazzi, Raymond, "Adelphia Cable to Expand Channel Offerings in Dover Township," Knight-Ridder/Tribune Business News, December 27, 1995, p. 12.
• Fabrikant, Geraldine, "A Family Affair at Adelphia Communications," New York Times, April 4, 2002, p. C1.
• Fabrikant, Geraldine, and Andrew Ross Sorkin, "Rigas Family Is Giving Up Voting Control of Adelphia," New York Times, May 24, 2002, p. C1.

• LFC Adelphia Bankruptcy Real Estate Auction
• Adelphia chapter 11 bankruptcy site
• Adelphia (Archive)
• News article on Rigases conviction
• News article on Adelphia's decision to offer X-rated pornography
• Yahoo! - Adelphia Communications Corporation Company Profile