Adelphia Communications Corp.'s former finance chief Timothy J. Rigas told mutual fund executive Wallace R. Weitz in 2001 that "outside investors" helped the Rigases buy company stock and debt, Weitz testified yesterday.
Weitz, a major investor in Adelphia, recounted the remark at the fraud trial of founder John J. Rigas, and two of his sons, Michael and Timothy. The three men are accused of hiding $2.3 billion in debt, stealing $100 million and lying about the source of $1.6 billion the family used to buy company securities.
Weitz, who heads the Weitz Value Fund and other mutual funds, said Timothy Rigas flew to Weitz's headquarters in Omaha for an hour-long meeting on Aug. 21, 2001. Weitz said he asked Rigas where the Rigas family got the money to buy company securities. Other prosecution witnesses said the Rigases tapped syndicated loans backed by Adelphia.
"He said, 'Oh, we have outside investors,' " Weitz told federal jurors in New York. "I took that to mean that at least some of the money used to buy shares came from outside investors, and they were sort of investment partners."
Adelphia, the No. 5 U.S. cable-television operator, disclosed on March 27, 2002, that the family had borrowed $2.3 billion in off-balance-sheet debt on loans backed by the company, and the Rigases used some of that to buy securities. Adelphia filed for bankruptcy in June 2002.
Weitz, 55, said that at the meeting, Timothy Rigas, 47, also discussed family-owned cable companies. Rigas said those companies had debt-to-cash-flow ratios of 6.5 to 1. Another prosecution witness, former finance vice president James R. Brown, testified that those ratios exceeded 30 to 1.
Weitz said he made his first investment in 1991 in Century Communications Corp., a cable television company acquired by Adelphia by 1999. That transaction replaced Century shares with Adelphia shares, Weitz said. He said his funds still own more than 20 million Adelphia shares, including 14 million bought after the March 27, 2002, disclosure about Rigas borrowings.
He conceded that it's a "long shot" that his shares will gain value when Adelphia emerges from bankruptcy.
John Rigas, 79, Michael J. Rigas, 50, Timothy Rigas and another former executive, Michael C. Mulcahey, 46, are charged with conspiracy, bank fraud, securities fraud and wire fraud. They pleaded not guilty.
On cross-examination by Ben Preziosi, an attorney for John Rigas, Weitz said he didn't know about the co-borrowing loans taken by Adelphia and the Rigas businesses until the March 27, 2002, conference call. Preziosi took Weitz through a series of regulatory filings that the defense attorneys said offered the public an understanding of the Rigas family borrowings.
Weitz said he didn't read regulatory filings in which Adelphia detailed those loans. "As a portfolio manager, I don't do analysis at this level, so I've never tried to find out which were available to me and which weren't," Weitz said.