June 11, 2002
Time to end the Rigas pity-party
by Bruce Jackson
Time to end the Rigas pity-party
by Bruce Jackson
Adelphia stockholders do not get toothpicks
My favorite Rigas-family scam is the one with the timber on the golf course.
It seems that the Rigases decided to build a very expensive, world-class golf course near where they live in Coudersport, Pa., the kind of course that would cost a huge amount of money to join and a large amount of money to continue as a member of. The only people like that around Coudersport are the Rigases and some of their friends.
There was one little problem: a large tract of land golf course architect Rees Jones wanted to use happened to be (a) covered by timber and (b) owned by someone else. The someone else who owned the land and the timber growing on it was willing to part with both, but only for a sizeable amount of money.
The Rigas family got the land for $434,000 and Adelphia bought the timber rights for $26.6 million, with the land and all rights going to the Rigas family for nothing in 20 years. That is, not only did they get Adelphia stockholders to pay for the land they wanted for their golf course, but in time Adelphia stockholders couldn't even get toothpicks out of the deal.
It gets worse, or, if you're a Rigas, better. According to the New York Times, the first appraisal said the timber rights were worth $20 million, which would have meant the Rigas family would have had to pay $7 million of their own money for the land their golf course architect wanted. But, as anyone who has ever been in the sights of a surgeon knows, a second opinion is always called for when you're about to enter something that might hurt. The Rigases found another appraiser, and this one provided a higher estimation of the value of the timber, which meant Adelphia stockholders paid $6.6 million more. (Geraldine Fabrikant, "Auditing Firm Said to Be Dismissed by Adelphia," NY Times Business section, 10 June 2002)
How elegant, how adroit, how economical. The family needs an expensive plot of land for its golf course, it buys the land with other people's money and rigs the deal so that, in time, the land and all associated rights go to the family and the people whose money paid for it get exactly nothing.
Velvet-glove journalism
It's that sort of thing, and a lot more, that got the family in its current legal mess, one that has spelled ruin for thousands of stockholders who thought the Rigases were using company resources for company ends, rather than private Rigas ends. In 37 months they turned a stock selling for $87 a share into a stock selling for 37 cents a share.
What puzzles me is the continuing velvet-glove three-hankie coverage this sorry story gets in the Buffalo News. They're tougher on down-and-out schlumps who burgle abandoned factories.
A page-one promo in last Saturday's News promised that Sunday's paper would present a first-ever interview with the three sons of Rigas family patriarch John. All three of those sons were part of the Adelphia high command, so all of them, presumably, were involved in or at least privy to the family's ruinous and cynical manipulation of Adelphia's books. This promised to be a really interesting piece of journalism.
It was a Rigas-style promise: it didn't come close to being kept.
The front-page first-ever interview – by veteran reporters Lou Michel and Michael Beebe and headlined "Rigas sons say family battered but strong" – that appeared in the Sunday, June 9 Buffalo News consisted of the Rigas brothers – James P., Michael, and Timothy – saying that the family is hanging together. The story was accompanied by photographs of James P. and John Rigas with this caption:James P. (44, former Adelphia executive vice president – strategic planning, JD, Stanford) told the reporters, "It's obviously a very hard time for us, but the family is holding up well.… Regardless of what comes out of this, the family unit will be stronger than ever.… We've always had a close family, and hard times draw you closer together."James P. Rigas, Adelphia's former vice president of strategic planning: "Regardless of what comes out of this, the family unit will be stronger than ever."
Michael (48, former Adelphia executive vice president-operations, JD, Harvard) said, "We're doing fine, and we're working very closely together.…Thanks to everyone for their support and prayers. It's meant an awful lot to us."
Timothy (46, former Adelphia finance chief, MBA, U. Penn – Wharton) was grateful for the "cards, e-mails, phone calls, packages, books and hugs," the family had received.
Michel and Beebe also quoted the family priest on John Rigas's mood and resiliency, and noted that the three brothers "declined to comment on criminal investigations and shareholder suits they face, along with their father."
No doubt under lawerly advice. If you were facing the felony charges now being developed by several state and federal prosecutors, and the various lawsuits already underway or now being contemplated by bitter Adelphia stockholders, I'm sure your attorney would tell you not to say anything meaningful about anything to anybody either. The brothers Rigas did a fine job, giving those reporters from Buffalo nothing but platitudes.
That explains the brothers' vapidity. But why did the Buffalo News run this as a page-one above-the-fold story? Why all this nicey-nice family-staying-together drivel about people who flew high on other people's money and who did a huge amount of harm to thousands of people who thought they were people who could be trusted?
Dracula, pre- and post-prandial
There was a second article – "A public firm's private deals" – about the Rigases on the same Buffalo News front page, It is by the same reporters, only with their names reversed, so this time it would be Mike Beebe who'd get the listing in a bibliography. A note at the end says Dan Herbeck contributed to the report.
This article lists many of the fiscal moves that have gotten the Rigases in so much trouble and that have wiped out billions of dollars of stock holdings. You read through it and you think the first article you read was maybe about three other guys. It's like this article is about what Dracula does when he goes out at night, the other about Dracula after he's been fed.
Beebe, Michel and Herbeck tell about the golf course scam, and note that the only Adelphia directors who knew about it were those who were members of the Rigas family. They tell how the Rigases used Adelphia's bank account as if it were their own, how John Rigas's wife was paid $371,00 for decorating company offices and $12.4 million of Adelphia money went to Eleni Interiors, a firm owned by the Rigas family. They tell how the Rigases borrowed Adelphia money to buy stock in Adelphia, and when margin calls left them $174 million in the red, they used Adelphia money to pay it off – which meant they got to invest, but other folks got to pay for the failure.
But then, after listing these abominations, the article shifts back to sugar. We hear about John Rigas buying and patching up seedy houses and renting them to workers. How he tuned up the appearance of Main street. How he gave money to people struck by disaster. People in Coudersport, Pa., the article suggests, just love John Rigas to death because of all the sweet things he's done. There were previous articles in the News that focused entirely on how folks in Coudersport, Pa., feel about John Rigas.
The reporters quote a priest who said, "John has particularly done a lot of fine things for people in this area, those who are poor and in need.…Quite frankly, I would hope there wouldn't be any criminal charges brought against them, but in building a company, sometimes you can cross over the line." (I resist all kinds of lines here, but I refer you to Diane Christian's article in Buffalo Report, "Sex Rules.")
The article closes with a discussion of the golf course. John Rigas himself signed the $100 Adelphia check for building permit fees filed with the Potter County Planning Commission. Donald Kirby, who manages the 75-year-old Coudersport Golf Course, where the ordinary folk go to hit their balls, said, "I know Mr. Rigas was very concerned about not wanting to hurt our course…I understand a deal had been worked out that would have allowed our members to play there several times a year."
Isn't that nice? It's sort of like the one or two days every year when the Count would invite all the villagers up to the castle for a hog roast or something.
Enough of nice
If I thought the Buffalo News editorial room had any irony, I'd think the whole page was a send-up, a gag, a tongue-in-cheek bit, the kind of thing you'd have written about how nice John Gotti is to the neighbors because he put on fireworks displays every 4th of July and chipped in for all the neighbors' funerals but one, and that guy's body was never found anyway.
Just picture it: there on the left side of page one above the fold is an article listing one shady deal after the other and ending with this pitiful local golf course manager talking about the golf course that won't happen but which, had it been built, he'd have only entered on manorial sufferance. And there on the right is that Good Housekeeping family report about family values.
But Warren Buffett's Buffalo News is a paper without irony. Remember how it covered the Peace Bridge affair? Remember those editorials telling us that the anachronistic steel twin span was a lousy idea but we should shut up and do what Andy Rudnick told us to do, and the news articles that never scraped the dust off the surface of anything, the "man-in-the-street interviews done only in Fort Erie that included, without identifying them as such, people the reporter knew were directly involved in the steel bridge planning? Remember the recent Sunday magazine article on Carl Paladino, the headline of which said he was a "philosopher/king"? This stuff isn't news; it's hagiography.
The News sent three of its most competent crime reporters to Coudersport, Pa., to look at aspects of this story. The coverage is, well, nice. It this a time we ought to be making nice? Enough of nice, already.
What those guys did in Coudersport, Pa.
People who ought to know better keep saying that what's happened to the Rigas family is like a Greek tragedy, that's it just awful that these swell folks have been brought so low by the vicissitudes of the financial world. They cite examples of their largesse, like using the family plane to do some service for a neighbor down in Coudersport, Pa., where they lived and had their corporate headquarters.
So far as I’ve been able to find out, the Rigases never had a family plane. Adelphia had a corporate plane which the Rigases used as if it were a family plane. Adelphia had a lot of money which the Rigases used as if it were family money.
The Rigases bought huge amounts of Adelphia stock – largely with money they borrowed from Adelphia. Those lendings and borrowings seem to have been hidden from everyone but the Rigas family, so Adelphia stockholders thought their money was earning more and in safer and more responsible hands than it was. They lied about subscribers, worked out funny-money deals with suppliers, and still haven't told anybody how much of Adelphia stockholder's money they really used for their own ends and how much of other people's money they pissed away or just lost.
While they played fast and loose with other people's money, the Rigases got the city of Buffalo to roll over and wag its tail and give it a sports arena and huge tax breaks for a building that was going to be built with public funds and which would operate for years with no taxes.
All those thousands and thousands of working stiffs who had money invested in Adelphia stock saw their investments shrivel to nearly nothing. Those working stiffs, like the working stiffs who were screwed by the power brokers at Enron, Tyco, and Global Crossing – have suffered real harm while people they trusted played wild and loose and bought very expensive toys. The Rigas family – like Dennis Kozlowski at Tyco, Ken Lay at Enron, and Gary Winick at Global Crossing – will come out of it rich. They won't be as rich as they were, but they sure won’t be as broke as all those pensioners whose small stock accounts their foolishness, avarice, and hubris obliterated.
That powerful father and the Harvard law and Stanford law and Wharton MBA sons planned everything they did – except getting caught at it.
My late Uncle Hymie
My late Uncle Hymie had skin like old leather and he used to sit and, in decent weather, nap in a Windsor chair waiting for customers in front of his store at Straw Church Circle on old highway 22 a few miles east of Phillipsburg, New Jersey. Hymie chewed cigars mercilessly. I suppose he lit them now and then, but my only memory is seeing them cold at one end and soggy at the other, getting ever shorter from the soggy end. Hymie died in that chair, in the sunlight on a Saturday afternoon, one of those foul cigars still in his hand.
My Uncle Hymie had, so far as I know, not the slightest interest in theory of any kind, and neither was he much into conversation. Which is why I think about his response to the catalog of Rigas and Adelphia abominations.
“Hymie,” I would say, “let me tell you about this tragic thing that happened up where I live.”
Hymie would listen to a few stations in the litany, then he’d have enough. He’d hold up his hand to shut me up and he would say, “Tragedy, schmagedy. Gonifs, Brucie, gonifs.”