High-Profile Media Cases Head to Court

Jan 5, 2004  •  Post A Comment

2004 will begin with a number of high-profile legal cases. Some involve entertainment industry players, while others are simply so important, they will command time and attention on news and information shows for months.
For those in show business, the most-watched cases will likely be the trials of Martha Stewart and Rigas family members who formerly ran Adelphia Communications, the sixth-largest cable operator in the United States.
Barring postponements, delaying tactics or last-minute plea bargains, the public-and fans of Court TV-can also look forward to splashy coverage of cases involving Michael Jackson, Kobe Bryant, Phil Spector, Robert Blake and Scott Peterson.
On the corporate front, beginning Feb. 2, former Worldcom Chief Financial Officer Scott Sullivan will face charges of manipulating the books at his company to hide operating expenses.
On the same day, Richard Scrushy of Birmingham, Ala.-based HealthSouth will have to answer to allegations that he created almost $3 billion in fake revenue while pocketing many millions for himself.
Warren Dennis, a partner with Proskauer Rose LLP in Washington, laments that news outlets, including cable channels Fox News and CNN, have a tendency to oversimplify these cases, lumping them together with corporate malfeasance matters. “There’s a lack of differentiation in much of the news coverage,” he said.
Amid a government crackdown on corporate criminals last year, John Rigas and his two sons were singled out for a highly visible arrest and arraignment last year. They are now accused of treating some $3 billion of their company’s funds as a private piggy bank. That case is expected to begin by late February. Adelphia is under new management that has distanced itself from the Rigas family.
Despite the fact that Mr. Rigas has been part of the cable industry since the beginning, some analysts said he is not a popular figure.
“The industry is not sympathetic,” said Matthew Harrigan, an analyst for Janco Partners in the Denver area. “The Rigases have always been regarded as being very difficult to deal with, and there were always questions about the family’s ethics.”
There is also concern that the behavior of the Rigas family will lead to scrutiny of other cable-related companies, two of which-Time Warner and Cablevision Systems-are the focus of ongoing Securities and Exchange Commission investigations.
Mr. Harrigan said there is a clear distinction between what Ms. Stewart is alleged to have done-personally profit from insider knowledge-and what the government says the Rigas family did, which basically was to steal from a public company. “What they allegedly did is far more egregious, to steal from your own shareholders,” he said.
Ms. Stewart, whose TV program has been a staple of women’s programming for almost a decade, has her defenders. Indeed, her Web site, MarthaTalks.com, has more than a dozen articles posted to it, some by prominent lawyers who feel she is being railroaded. One voice in her support, columnist Rena Pederson of The Dallas Morning News, told TelevisionWeek, “Whatever Martha did, it was not of the same magnitude as the other cases.”
Ms. Pederson is concerned that the trials will be a media circus-a feeding frenzy fed by 24/7 news operations that need to fill airspace. “I don’t think it is fair to lump the Stewart case in with the other trials,” she said. “Even though it involved a financial matter, the charges evolved from one trade and her defense of that trade, not an apparent pattern of fraud and management abuse, as appears to be the situation in the Rigas, Worldcom and Enron cases.
“It taints her simply by putting her in their company, when in truth, hers was a personal trade and it was the government that dragged her company into it.”
Calls to Ms. Stewart’s “crisis management” representatives were not returned immediately. Ms. Stewart’s own defense comes down to this, as she states online: “I simply returned a call from my stockbroker. Based in large part on prior discussions with my broker about price, I authorized a sale of my remaining shares in a biotech company called ImClone,” Ms. Pederson said.
Such a defense is sure to foster sympathy among media executives who worry that they have done essentially the same thing. However, the government will attempt to prove that her stockbroker’s information was based on insider information, with possible testimony from employees of the brokerage house supporting that view.
Mr. Dennis said that many legal observers believe that Ms. Stewart has both “the Q quotient” [a measure of media recognition and likability] and “the legal case to win this.”