Embattled Adelphia Communications Corp. founder John Rigas has been trying to sell property to raise cash, moves that have raised the ire of the MSO he founded and could bring into question the validity of the bail agreement that so far has kept him and his three sons out of jail on criminal conspiracy charges.
Adelphia filed for Chapter 11 bankruptcy protection on June 25. On July 24, Adelphia filed a civil complaint accusing the Rigas family of conspiring to use company funds for their own benefit and filing false financial statements that didn't reveal those transactions.
The Rigases — John and sons Timothy and Michael — were arrested by U.S. Postal Inspectors on July 24 on charges of conspiracy, bank fraud, mail fraud and wire fraud.
According to documents filed in U.S. Bankruptcy Court for the Southern District of New York on Aug. 26, Adelphia claims that John Rigas has attempted to sell at least two properties he sold to Adelphia in 1994 (although the title had not been transferred) and that at least one of those properties was under contract for imminent sale.
According to an affidavit filed with the court by Charles Raptis, assistant to the president at Adelphia, the MSO only learned of the Rigases' intent to sell the properties after being contacted by an agent who was involved in the sale.
In his statement, Raptis said his responsibilities include the maintenance and disposition of real property by the MSO.
Around Aug. 21, Raptis said he received a call from Steve Billirakis, who is employed by Adelphia to assist in real-estate matters. Billirakis told Raptis he was assisting John Rigas in selling real estate, and was coming to the MSO's Coudersport, Pa., headquarters to complete documents for the sale of a property located on Daufuskie Island in Hilton Head, S.C., for $560,000.
He said Rigas had also instructed Billirakis to sell property in Roslyn, N.Y., known only as "Grist Mill," according to the affidavit, which did not assign a value to that holding.
George Carpinello, a partner in the law firm of Boies, Schiller & Flexner LLP, which represents Adelphia, filed statements with the bankruptcy court requesting a temporary restraining order against the Rigases to prevent them from selling property.
According to Carpinello's statement, allowing the Rigases to sell the property could affect future disbursements to creditors.
"If this property is sold or transferred without the prior approval of this court, these assets will be irreparably and irretrievably lost to the debtor's estate, since it is clear that the defendants will have no ability, given their substantial civil and criminal exposure, to return such funds to the estate," Carpinello wrote.
Carpinello is seeking the restraining order until the extent of Adelphia's ownership interest in the properties can be determined.
ADELPHIA'S CLAIMS
Basically, Adelphia is making two claims. It says it owns some of the properties outright through a deal reached in 1994 by Island Partners — a Rigas family partnership — to sell 58 properties to Adelphia for $14.3 million.
But the MSO may also lay claim to properties that appear to be owned by the Rigases, including Tim Rigas' $2.4 million Beaver Creek, Colo., condo, because of company money used to renovate and furnish the property, and because the MSO also paid property taxes on much of the family's real estate.
According to the document, about $1.2 million in Adelphia money was used to renovate Tim Rigas's Beaver Creek condo — including payments of $166,000 to Eleni Interiors Inc., a decorating firm owned by Doris Rigas, John Rigas's wife and Tim's mother.
It did not say in the statement whether Adelphia paid taxes on the property.
But between 1995 and 2001, Adelphia paid property taxes on a dozen pieces of real estate amounting to $669,400.
The company claimed that figure could be higher because, according to the filing, Adelphia's records only date back to 1995.
The filing listed 13 properties — including Tim Rigas's Beaver Creek condo — as "examples of properties in which Adelphia has an ownership interest by virtue of use of Adelphia funds by the Rigas family or Rigas family entities, or by express contractual agreement."
LAWYER: 'WRONG' CLAIM
Peter Fleming, John Rigas's lawyer for the criminal suit against him, said he disputes Adelphia's claim that it, and not the Rigas family, owns those properties.
"The best thing I can say is that the U.S. attorney hasn't called me," Fleming said. "Everybody I talked to said that Adelphia is wrong on ownership.
"Their theory is that Adelphia paid the taxes. I've helped my kids out with their mortgage from time to time, and I don't think they gave me the ownership of their house. The whole thing is a little confusing to me."
At the Rigases' arraignment on July 24 in New York, the U.S. attorneys said the property pledged for the bail included a $3.3 million condo in Hilton Head; a $2.4 million condo in Beaver Creek; and 5,000 acres in Coudersport, Pa., including the Rigas family home. At that time, no value was assigned to the Coudersport land.
"We are aware of the situation, but unsure of the properties involved," said Michael Kulstad, a spokesman for the U.S. Attorney's Office in Manhattan.
Generally, Kulstad said that if it was determined that assets used for a bail were frozen or not owned by the bailee, "it may cause us to come back into court."
What happens next is anyone's guess, he added. "Each case could turn on its facts and you have to deal with those issues as they come up," Kulstad said.
COULD THREATEN BAIL
Stephen Ryan, a former prosecutor and now a partner in the Washington, D.C.-based law firm Manatt, Phelps & Ryan, said that although he was unfamiliar with the case, it appears that the Rigases' bail could be in jeopardy.
"I have never seen anything like this in my career," Ryan said. "Most people don't commit fraud for the transaction that keeps them out of jail for a short period of time. Instinctively, you know that that can't be an appropriate thing if they don't own an asset and they pledge it. That's a garden-variety fraud."
Adelphia spokesman Stuart Fischer said that the matter was under active investigation and declined to comment.
Carpinello did not return several calls for comment.
