Adelphia shareholders seek to block hirings

Jan 13, 2003  •  Post A Comment

A committee appointed by the U.S. Bankruptcy Court to represent shareholder interests in the Adelphia Communications Chapter 11 bankruptcy proceedings has expressed its “vehement opposition” to the proposed hiring of two veteran cable executives.
The employment of former AT&T Broadband executives Bill Schleyer and Ron Cooper at lucrative terms was called “manifestly unreasonable” and “severely prejudicial” to the interests of Adelphia and its shareholders in a letter from the committee’s law firm to Adelphia’s board of directors.
The committee also has filed suit seeking to compel Adelphia to hold a shareholders’ meeting “at the earliest practicable time” to elect new directors, not beholden to the founding Rigas family, and to prevent the incumbent board of directors from influencing the outcome of the election by voting the Rigas shares.
The proposed hirings to which the committee objected are now “moot,” according to a source close to Adelphia’s side in the contract negotiations, who also said that a new agreement, which hasn’t “gelled” yet, is under “active” discussion. No other executives beyond Mr. Schleyer and Mr. Cooper are being considered “at this time” for the top posts at Adelphia, according to the source.
An Adelphia spokesperson denied the committee’s allegation that the present board is in any way beholden to the founding family. As for the proposed agreement with Mr. Schleyer and Mr. Cooper, the spokesperson would not comment beyond saying that “negotiations continue.”
The committee’s lawyers are aware of a proposed new contract for Mr. Schleyer and Mr. Cooper, according to a spokesperson for the law firm, but, “It doesn’t void the issues that they are raising [in the letter].”
Mr. Schleyer would become Adelphia’s CEO and chairman, while Mr. Cooper would become president and chief operating officer, according to the committee letter. Mr. Schleyer and Mr. Cooper, known as turnaround specialists, were AT&T Broadband’s top executives, and they are widely credited with bringing a troubled AT&T Broadband back to the point at which it was an attractive acquisition target for Comcast Cable.
The committee letter specifically charges that a proposed three-year employment agreement would pay the duo a $6 million signing bonus and the “incredible sum” of more than $65 million for the first year to 18 months of service. The letter also charges that the proposed agreement does not focus on improving the company’s long-term prospects, but instead offers the two executives substantial financial incentives to bring the company out of Chapter 11 prematurely.
The committee’s lawsuit specifically asks the court to enjoin the Rigas family, or any of its board or other representatives, from voting Rigas shares in any shareholders’ meeting. Adelphia has not had a board election since August 2001, according to the committee, when Rigas family members held approximately 63 percent of the company’s voting control and before their alleged malfeasance had been discovered.
The Adelphia spokesperson said that the present board, far from being beholden to the Rigas family, has taken the lead in an “aggressive effort to recover assets improperly taken by the Rigas family and the entities they control as well as to repair the other damage they inflicted upon [Adelphia].”
Members of the founding Rigas family, including patriarch John Rigas, have been accused of looting Adelphia, the nation’s sixth-largest multiple system operator, of as much as $3 billion for their own financial benefit.
The committee, formally known as the Official Committee of Equity Security Holders, includes five of the largest holders of Adelphia stock unaffiliated with the Rigas family. It filed its suit last week in the U.S. Bankruptcy Court for the Southern District of New York. The committee claims that non-Rigas shareholders now control approximately 80 percent of the company’s common stock.
A Bankruptcy Court hearing was set for Jan. 10 to address the committee’s motion to hold a new Adelphia board election. At press time, that hearing had not yet commenced. Attempts to reach Mr. Schleyer and Mr. Cooper for comment were not successful.