July 8 (Bloomberg) -- Adelphia Communications Corp. founder John Rigas and his son Timothy were convicted of conspiring to loot the company to fund lavish lifestyles and lie about finances before its bankruptcy.

The Rigases used Adelphia as a ``private ATM'' to fund $50 million in cash advances, buy $1.6 billion in securities and repay $252 million in margin loans, prosecutors told federal jurors in New York before the verdict. Former assistant treasurer Michael Mulcahey, the only defendant to testify, was acquitted of all charges.

The four-month trial offered one of the most extensive public examinations of corporate wrongdoing since the wave of high-profile prosecutions began after Enron Corp.'s collapse in 2001. Federal juries this year convicted homemaking entrepreneur Martha Stewart and former Credit Suisse First Boston banker Frank Quattrone of obstructing U.S. investigations.

``The Rigases were so greedy and they took so much from Adelphia, that when the full extent of the lies and the looting was revealed, it bankrupted the company,'' Assistant U.S. Attorney Christopher Clark told the jury of seven women and five men in New York during his closing argument.

John and Timothy Rigas were also convicted of securities and bank fraud. They were acquitted of wire fraud charges.

The jury, which deliberated for eight days, acquitted John Rigas's son Michael of conspiracy and said it could not make a decision on securities-fraud and other charges against him. The jury found Michael Rigas guilty of no charge. The jury was ordered to return tomorrow for further instructions on the undecided Michael Rigas charges, the judge said.

The Charges

Prosecutors accused John Rigas, 79, his sons, Michael, 50, and Timothy, 47, of using Adelphia, the No. 5 U.S. cable television operator, to live extravagantly in the company's onetime headquarters in rural Coudersport, Pennsylvania, and in housing in New York City, Colorado, South Carolina and Cancun, Mexico. John Rigas drew cash advances of $1 million a month. He also used company money to buy 17 cars, $500,000 of antiques, and $25 million in timber rights near his farm in Coudersport, prosecutors said.

The jury had requested more than 100 exhibits, some of which they sought more than once. Jurors also asked for 19 excerpts of testimony or transcripts. Prosecutors and defense attorneys introduced more than 1,000 exhibits at the trial.

The panel was asked to unanimously answer as many as 293 questions on a special verdict form, consider the judge's 108 pages of instructions and review a 95-page indictment.

Hollywood Actress

Prosecutors had told jurors that Timothy Rigas, the former finance chief, often took personal trips on company jets, including some with Hollywood actress Peta Wilson, who testified. Rigas, an avid golfer, spent $13 million building a golf course in Coudersport and joined several clubs, including one for $700,000. Prosecutors said he flew two Christmas trees from Coudersport to his sister in New York for more than $6,000.

Prosecutors accused the Rigases of lying to investors about finances at Adelphia from 1999 to 2002 as it borrowed $9 billion to fund an acquisition spree and to upgrade cable lines. Much of that money came from syndicated loans taken out jointly by Adelphia and Rigas businesses. Prosecutors said those loans helped fund the Rigases' purchase of $1.6 billion in company stock and debt.

Adelphia shares plunged after the company disclosed on March 27, 2002, that it backed $2.3 billion in Rigas borrowings under the loans, including some to buy securities. The company filed for bankruptcy in June 2002. Prosecutors say the Rigases used no cash to obtain $822 million in securities, and they falsely said they paid with ``immediately available funds.''

The Prosecutions Argument

Assistant U.S. Attorney Richard Owens argued that the Rigases, who live together, must have talked about their debts. He asked if ``Michael Rigas never came home from work one day and said, `Gee, Dad, by the way, how are we going to pay for that?''' Owens asked if ``Michael Rigas never said, `Gee, Tim, have you thought about how we're going to pay for this stock?'''

Prosecutors said the Rigases never properly disclosed in U.S. Securities and Exchange Commission filings that they used syndicated loans to buy securities or tapped the cash management system for other personal expenses.

The indictment accused the men of inflating Adelphia's cable subscribers and its plant upgrade. Prosecutors also accused the Rigases and Mulcahey of lying to lenders and bondholders about Adelphia's financial health and inflated revenue through a scheme with two suppliers of cable set-top boxes, Motorola Inc. and Scientific-Atlanta Inc.

Formal Charges

Prosecutors say the Rigases and Mulcahey conspired to commit securities fraud, bank fraud, wire fraud, lie in SEC filings and falsify Adelphia's books and records.

Defense attorneys assailed the government's case and said the Rigases could make withdrawals from the cash management system because they contributed funds to it. They also said that company directors approved drawing up to $5 billion on the syndicated loans, which permitted securities purchases.

Peter Fleming, an attorney for John Rigas, told jurors that his client was ``basically in the dark'' and ``out of the loop'' about company finances, especially after 1999, when he underwent heart surgery and was diagnosed with bladder cancer. Fleming called the charges a ``rush to judgment'' by prosecutors.

Timothy Rigas was too busy running the company after his father's illness to cook the books and relied on outside auditors and lawyers to prepare proper financial statements, his attorney, Paul Grand argued. Grand compared the prosecution to a ``witch hunt'' by prosecutors after the Enron collapse.

`Clueless'

Andrew Levander, an attorney for Michael Rigas, said his client was ``clueless'' about financial matters and that he had no criminal intent when he signed documents that prosecutors say are false. He depicted his client as an honest man who drove a Toyota and never indulged in extravagances.

Mulcahey denied in testimony that he intended to defraud the company or knew that he signed false statements to bankers and bondholders. His attorney, Mark Mahoney, said prosecutors sought a scapegoat after Adelphia's collapse. He compared the charges to regicide, or the killing of kings in centuries past, calling it a case of ``Rigas-cide.''

Defense attorneys assailed the credibility of former finance vice president James Brown, who pleaded guilty to fraud and conspiracy charges and testified for nearly a month in a bid for leniency. Mulcahey called him a ``frightening genius'' who used his ``big brain'' to concoct testimony.

The criminal case is: U.S. v. Rigas, 02-CR-1236, U.S. District Court, Southern District of New York.

To contact the reporters on this story: David Voreacos in U.S. District Court in New York at and dvoreacos@bloomberg.net.

Last Updated: July 8, 2004 16:44 EDT