ADELPHIA FOUNDER JOHN RIGAS STEPS DOWN AMID INVESTIGATIONS
Man who founded Adelphia Communications in 1952 stepped down as pres., chmn. and CEO Wed., saying his resignation would help struggling company. “After much thought and prayer about what will best serve the needs of the company and our stakeholders, including our shareholders, employees, customers and communities, I have concluded that Adelphia needs fresh, independent leadership,” 77-year-old John Rigas said. Erland Kailbourne, former chmn.-CEO of Fleet National Bank-N.Y. Region, was named chmn. and interim CEO. Kailbourne is chmn. of company’s audit committee and has acted as independent dir. since 1999. “I welcome this opportunity to help Adelphia meet its current challenges,” he said. Rigas will stay on as chmn. emeritus, keeping seat on board and continuing to represent company with cable industry and other constituencies. “I am confident that the changes under way at Adelphia are the beginning of a process that, under the leadership of Erkie Kailbourne, will restore the credibility and rebuild the value of this fine company,” said Rigas, who is on board of NCTA, C-SPAN, and Cable Ad Bureau. His resignation came day after Adelphia’s 2nd-largest shareholder, Leonard Tow, announced in filing at SEC that he was trying to wrest 3 board seats away from Rigas family by exercising options he had held since selling his cable systems to family in 1999 (CD May 15 p12).
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Nation’s No. 6 cable operator also announced that it had suspended audit by Deloitte & Touche pending completion of internal company investigation and hired same high-powered attorney who represented Al Gore during his battle with George Bush for Fla.’s electoral votes. Adelphia said its own investigation focuses on issues raised in connection with preparation of its 10-K annual report, which has been delayed twice in being filed at SEC. SEC has begun formal investigation of Adelphia’s accounting practices (CD April 18 p5). Questions focus on certain co-borrowing agreements that company entered into with holding companies controlled by Rigas family but didn’t list on its balance sheet. Those loans could amount to $2.7 billion or more. Company since has said it expects it will have to restate its earnings for 1999, 2000, 2001 and list as much as $1.6 billion on its books as liabilities (CD May 3 p9). Disclosures have sent stock reeling and prompted Wall St. analysts to downgrade stock. Company said it had retained David Boies and firm of Boies, Schiller & Flexner to advise it in connection with investigation and other matters. Adelphia is facing string of shareholder lawsuits.
Announcements came as Adelphia was about to face Nasdaq hearing board today (May 16) in attempt to keep stock exchange from delisting its shares. Nasdaq halted trading on Adelphia stock at 8:18 a.m. Wed., saying it wouldn’t allow shares to be traded until Adelphia had provided further information. Nasdaq spokesman declined to specify what information exchange was seeking. Trading halt can last for hours or months, he said. Nasdaq has threatened to delist shares because Adelphia has been delinquent in its SEC filings. Adelphia said last week that it was putting systems in L.A., Fla., and other key areas on auction block in attempt to regain equilibrium on its balance sheet (CD May 10 p8). Separately, Pittsburgh Post-Gazette reported Wed. that Adelphia Business Solutions, which was spun off from Adelphia Communications earlier this year and subsequently filed for bankruptcy, had laid off as many as 800 employees -- 1/3 of its work force. Company officials didn’t return phone messages seeking comment.