Perhaps the biggest surprise thus far is that the family members have not made a concerted effort to blame Deloitte & Touche and the rest of the board for their own co-borrowing. Nor have they turned the spotlight on their corrupt investment banker/cheerleaders or the rest of the rather shady cable industry. If this proves anything, it's that, no matter what, the Deal Club must be preserved at all costs.
Predictably, The Buffalo News has stuck by its sympathetic treatment of John Rigas in its coverage. Don't expect them to write anything that will tarnish the image of their Republican bigwig favorite Erland Erkie Kailbourne, either. As the rest of the board members say their obligatory mea culpas, prosecutors will focus on getting as many convictions in the inner circle as possible.
The defense thus far has been worth the price of admission. In cross-examining one witness who was brought up to represent defrauded shareholders, lawyers established that the gentleman on the stand had engaged in day trading. The line of reasoning presented to the jury, then, went something like this: since there are so many day traders out there and because mutual funds are diverse, maybe there weren't enough actual shareholders in Adelphia to really worry about. In a way maybe everyone who holds stocks shares a little bit of guilt with the Rigases for paying to much attention to the short term, pumped-up bottom line, the concept of communal guilt writ large, to be sure.
The Rigases, in this view, are the real victims, just like Mel Gibson and the rest of the extreme religious right are the real victims of the vast liberal media conspiracy masterminded by The New York Times and Alt. The Rigases and The Origins of The Crash.
Roger Lowensteins cover story on the Rigases and the Adelphia fiasco titled The Company They Kept in the Feb. 1 edition of The New York Times Magazine was notable on several accounts. First and foremost, it was an excellent plug for Origins of The Crash, his new book, of course. In terms of the Adelphia meltdown, its the first analysis weve seen that attempts to touches upon the culture that the Rigases created, and get beyond the good Rigas (the old man, John) bad Rigas (his son, Tim), treatment that weve seen enough of in The Buffalo News.
Its also the first article that has focused on the involvement of local hero Erland Erkie Kailbourne, former Fleet Bank chairman and Business Backs the Bills quarterback. As head of the audit committee of Adelphia, Kailbourne should have known about the co-borrowing agreement that the Rigas family created with its company. Indeed, it was under his watch that the company released a financial statement relegating more than two billion dollars in outstanding family loans to a footnote.
Lowenstein also scrutinized other outside directors, such as Pete Metros, who, as family friends, acted more as rubber stampers than as investor watchdogs. While resisting trite Greek tragedy clichés, the author lays at least part of the blame squarely at the feet of stock analysts, who at best could not see the forest for the trees and at worst got sucked into the excitement of the little companys big time financial leveraging and ignored their ethical responsibilities to the investor.
Despite these strengths, Lowenstein missed a few points that were reported in Alt at the time of the companys collapse and should be included in any serious discussion of the company.
While executives at scandal-ridden companies such as Enron were seemingly able to buy their way out of criminal prosecution through massive political campaign contributions, the Rigases were supposed to be an easier target for lack of political juice. This view ignores that the fact that the Rigases did have juice of a slightly different flavor.
In addition to Kailbourne, the company enjoyed the support of Bob Wilmers, CEO of M&T Bank, who made a public appearance with Tim Rigas touting the companys bright future. Gushingly obsequious articles in The Buffalo News, whose chairman is Warren Buffett, probably didnt encourage skepticism from those who were paying attention. One month prior to the companys now infamous conference call with Oren Cohen of Merrill Lynch which exposed the Rigases borrowing scheme, Governor George Pataki and a retinue of local politicians actually celebrated the companys deleveraging with an event on the site of it future corporate headquarters which was to be built a stones throw from The Buffalo News building. The front page ovations continued in that publication. While Lowenstein noted the extravagance of the companys indirect funding of Ellen Rigas motion picture, he didnt mention that her husband Peter Venetis was another outside board member who had come up through the ranks of Solomon Smith Barney on the investment bank side.
With a mix of Wall Street insiders and the apparent support of the folksy outsider Warren Buffett, its easy to see why the Rigases felt that they could bluff their way through what they deemed a short-term cash crunch. As long as analysts such as Jack Grubman were around to keep bidding up the valuation of each subscriber in the industry, solvency was just another stock offering away.
In the midst of the scandal, Pataki reappointed Erkie Kailbourne to the New York State Banking Board, which oversees approximately two trillion dollars in assets. This was a significant show of public, political support that may have helped to draw the last round of suckers to the table as the stock briefly rebounded After the Enron effect set in and the fate of the Rigases became clear, it was Kailbourne who was hailed as the knight in shining armor who would lead the company quietly into Chapter 11.
http://www.detnews.com/2003/metro/0306/19/metro-196729.htm By John McMahon
The Adelphia trial is kicking into gear, and now that Martha Stewart has been crucified, the rabble is looking for another scapegoat to help wash away the sins of Enron, Global Crossing, Worlcom, Halliburton, etc. Judging from George W. Bush's initial get-tough reaction to the highly choreographed arrest of the Rigases in New York, we know where to look for the next sacrificial lambs. We know now that one place not to look will be the former board members of Adelphia.