Adelphia Wanes As Investors Wrangle Over Remains

03 June 2002

As US cable TV group Adelphia slips further into what could be terminal decline, its boardroom is split by wrangles over the residual assets left by the antics of the Rigas family.

Facing each other across the barbed wire are Leonard Tow, the group’s largest stockholder after the Rigas clan, and Adelphia’s interim board led by acting chief executive Erland E Kailbourne.

Tow, who owns around 10% of Adelphia and already commands two seats on its board, is thought to be attempting a re-run of the stratagem he employed at Citizens Utilities Company, which he took over without paying a single cent.

He last week approached Adelphia board member Leslie Gelber claiming the support of a large group of institutional investors and demanding to be named chairman – a demand to which Adelphia is unlikely to acquiesce.

If history repeats itself, warn critics, Tow’s foot once wedged inside Adelphia's boardroom door will kick out the existing directors one by one and replace them with his associates – including (as in the case of Citizens Utilities) his wife. Indeed, Mrs Tow is still a director of that company.

The conduct of Tow and his cohorts once in power at CU was likened by the California Public Employees Retirement System to “pigs at the trough”.

The Adelphia board is currently negotiating the sale of cable units with around 1.1 million subscribers in a bid to raise much needed cash. But Tow on Thursday sent a letter to Kailbourne – copied, allegedly, to the press – damning the plan to sell “valuable” cable assets in what he claimed was an “atmosphere of desperation.”

Counter-attacked Kailbourne, whose reply was also copied to the press: “I cannot understand what purpose you believe is served by including a knowingly false statement in a letter – particularly a letter that I understand you released to the press contemporaneously with faxing it to me.”

Tow’s energies, suggested Kailbourne, would be better “directed toward what will benefit all of the company’s shareholders and not in pursuit of a separate agenda.”

Other share holders, however, declare ‘a plague on both your houses’ and demand new management. Says Gordon Crawford, a senior vp at Capital Research and Management, which owns nine million Adelphia shares: “It is critical that the company install an experienced cable executive.”

Data sourced from: New York Times; additional content by WARC staff