Probe may hamper sale of Adelphia

PHILADELPHIA, PENNSYLVANIA - Unlike elaborate accounting schemes that toppled Enron, simple ``self-dealing&#39;&#39; by the founding family has Adelphia Communications Corp. on the ropes, a professor specializing in class actions and corporate law said. <br> <br> ``This is simpler, plain-vanilla self-dealing,&#39;&#39; Columbia Law School professor John Coffee Jr. said. ``There isn&#39;t the exotic structure of transactions that characterized Global Crossing or Enron.&#39;&#39; <br> <br> Simple or complicated, the multiple investigations into off-the-books debt at Adelphia and how the family of founder John J. Rigas has used the money may hurt the company&#39;s efforts to extricate itself from its financial tangles, an analyst said. <br> <br> The nation&#39;s sixth-largest cable television company said May 8 it would seek bids for systems that include nearly half its 5.8 million subscribers in 32 states and Puerto Rico in an effort to reduce debt and raise cash. <br> <br> ``Right now, everyone believes that the assets are quality assets and they would be able to cover debt,&#39;&#39; said Joseph Galzerano, high-yield telecommunications analyst for CIBC World Markets. <br> <br> But with investigations under way by the Securities and Exchange Commission and two federal grand juries, system sales may be put on hold by wary buyers. ``If they are impacted in any way by lawsuits and investigations, that would be a problem,&#39;&#39; Galzerano said. <br> <br> Coffee, who has served on the Legal Advisory Committee to the board of directors of the New York Stock Exchange, said Adelphia&#39;s financial tangles lacked the ``novelty&#39;&#39; of the international financial arrangements engaged in by Enron and Global Crossing. <br> <br> The professor testified before the Senate Commerce Committee in December about the proliferation of cases involving accounting irregularities and how the Enron collapse showed that important information can be concealed by ``opaque&#39;&#39; accounting practices. <br> <br> At Adelphia, in contrast, ``I haven&#39;t heard that there were elaborate structures set up,&#39;&#39; Coffee said. <br> <br> The cable company&#39;s stock has plunged since the company revealed in March that it failed to disclose $2.3 billion in borrowing by the Rigas family and family owned partnerships for which the company might bear liability. <br> <br> The company has still not filed its annual 10-K financial statement, which was due April 1, and has said it would restate three years of financial results to show $1.6 billion of the off-the-books debt as a liability. <br> <br> Trading in Adelphia&#39;s stock remained suspended Monday. It was halted Wednesday as the Nasdaq Stock Market sought additional information, and Adelphia has said Nasdaq is expected to decide soon whether the stock should be delisted because of the delinquent 10-K. The May 14 closing price of $5.70 a share was down nearly 87 percent from a 52-week high of $42.97. The stock had been as high as $86.60 in mid-1999. <br> <br> Adelphia said last week it was cooperating with investigations by federal grand juries in Pennsylvania and New York. <br> <br> Company officials didn&#39;t immediately return calls seeking comment on reports in The Wall Street Journal and The New York Times that investigators were looking at allegations that the Rigas family used company money for private projects, including building a golf course. <br> <br> The Wall Street Journal also reported that Adelphia allegedly instructed managers to purchase office furniture from Eleni Interiors, a shop in Olean, N.Y., that the newspaper said the Rigas family owns. A woman who answered the phone at Eleni Interiors said no one at the shop would comment and declined to identify herself. <br> <br> If those allegations prove true, Coffee said, they would still probably amount to ``penny ante dealings&#39;&#39; compared with the magnitude of off-the-books debt for which the company may be liable. <br> <br> Adelphia said during the weekend that its vice president of finance, James R. Brown, resigned after 18 years with the company. He departed just days after founder John J. Rigas, 77, resigned as chairman and chief executive officer, and his son, Timothy Rigas, resigned as chief financial officer. <br> <br> The Rigases remain on Adelphia&#39;s board, and in firm control, with the Rigas family owning about one-fourth of the company&#39;s stock, and 60 percent of the voting stock. <br> <br> Nevertheless, Coffee said, ``They do have billions of dollars worth of publicly held shares, and those shareholders were not told they were buying into this debt by the family.&#39;&#39;