John Rigas opened his first business in 1952 in Coudersport, Pennsylvania, an old-fashioned movie theater, something he still would own at the time he would be indicted for fraud and other felonies in running Adelphia, the giant cable firm that would spring from this small beginning in media entertainment.

His foray into cable began when he and his brother bought a cable franchise for \(\$ 300\), also in 1952. They chose the name "Adelphia" for their new company, a name which is Greek for "brothers."713 Early in the 1980s, John bought out his brother's interest in Adelphia and began bringing his grown sons into the business. By 2002, Adelphia was operating cable companies in 32 states and had 5.7 million subscribers. At its peak, Adelphia was the sixth largest cable company in the United States. Adelphia claimed that its aggressive marketing was partially responsible for its amazing growth and earnings. \({ }^{714}\) Adelphia's annual reports also touted its "clustering strategy," something others in the cable industry did not really understand. \({ }^{715}\) Many doubted the existence of such a strategy and questioned Adelphia's performance, but when it went public, its stock skyrocketed.

The Rigas family was respected, indeed revered, in Coudersport. John Rigas was often called "a Greek god" by the locals for his stunning looks as well as his generosity with everyone from employees to the needy. However, subsequent investigations would show that the Rigases had "borrowed" over \(\$ 3\) billion from the corporation for personal investments in hockey teams, golf courses, and even the independent film company created by daughter Ellen Rigas Venetis (married to Peter Venetis, who was also an officer of Adelphia). \({ }^{716}\)

There were also webs of transactions between the Rigas family and Adelphia. For example, John Rigas owned a furniture store from which Adelphia purchased all of its office furniture. However, Adelphia then gave the furniture store free ads on its cable and Internet services. A seasoned federal investigator was quite taken aback by what the Justice Department's review of corporate records uncovered, "We've never seen anything like this. The level of self-dealing is quite serious.".717 Mrs. John Rigas, Doris, was paid \$12.8 million for her work as a designer and decorator for Adelphia offices. The Rigas family farm, billed as a honey farm in local literature, really just provided landscaping, maintenance, and snow removal services to Adelphia, for a fee. \({ }^{718}\) Adelphia invested \(\$ 3\) million in "Songcatcher," a film produced by Ellen Rigas Venetis. \({ }^{719}\)

The family managed to conceal the self-dealing quite well from its auditors. When the financial statements were finally restated, cash flow had to be reduced by about \(\$ 50\) million per quarter. In total, the Rigases had concealed \(\$ 3\) billion of takings from the company from its external auditor, Deloitte Touche. \({ }^{720}\) Timothy Werth, who was Adelphia's director of accounting, entered a guilty plea to fraud, securities fraud, wire fraud, conspiracy, and other crimes related to the concealment as well as the falsification of earnings. \({ }^{721}\) In his statement of facts for his guilty plea, Mr. Werth said that he had been cooking the books from the time he first joined Adelphia when he was 30 years old, some 10 years.

The Rigases owned 20\% of Adelphia stock and, as a result, held \(60 \%\) of the voting shares of the company. Because of their share control, the board consisted of \(60 \%\) Rigas family affiliates, including John Rigas, sons Michael, James, and Timothy, and son-in-law, Peter Venetis. \({ }^{722}\) The family also did business with Adelphia in other ways, and the transactions always seemed to net a nice profit for the Rigases. For example, Adelphia paid \(\$ 25\) million for the timber rights to a piece of property that it then sold to the Rigas family for \(\$ 500,000.723\) There were substantial loans made to members of the Rigas family by the corporation, some used for business investments and some used to keep them from selling Adelphia shares to satisfy personal investment responsibilities. There were also conflicts galore among officers, board members, and the Rigas family, with the officers and board members actually competing with Adelphia for the purchase of cable systems and, with something that takes the term chutzpah to a new level, the company providing the credit, collateral, and financing for the family members to make the purchases for themselves. The total amount of the loans to the Rigas family was \(\$ 2.3\) billion, much of that amount concealed from the board and auditors through off-the-book entities. \({ }^{724}\) It was when a financial analyst uncovered at least \(\$ 1\) billion in off-the-book debts, that the board filed an \(8-\mathrm{K}\) disclosure statement and investigators came calling. \({ }^{725}\)

The Rigases also owned finance companies that purchased cable services, and then those finance companies entered into contracts to sell cable services to Adelphia. \({ }^{726}\) Adelphia was required to purchase the cable services at full retail prices from the Rigas firms. Nell Minow, a renowned corporate governance expert and head of The Corporate Library, said the following about these arrangements: "Even the existence of a credit line that allows the family to buy cable systems raises conflict-of-interest questions because the company was actually funding the family's ability to compete for properties."727 One accounting and financial expert said the conduct by the Rigases at Adelphia was just "plain-vanilla-old-fashioned self-dealing," \({ }^{28}\) Many referred to the Rigases' conduct as not clever and nothing more than a classic "personal piggy bank" case. \({ }^{729}\) The lines between the Rigases' activities and ownership and Adelphia's ownership were so blurred that local tax records showed that Adelphia paid the real estate taxes for all of the Rigas families and their 12 homes with one check. \({ }^{730}\) Adelphia also fronted \$12.8 million for the construction of a golf course owned by the Rigas family...................

Discussion Questions 1. Does using money for good deeds excuse violations of the law or accounting principles? Is John Rigas a Robin Hood?
2. Why do you think the officers got comfortable with the conflicts and mixing together of personal and company business interests? Did the philanthropy and good for Pennsylvania provide their justification?