Troubled Cable Mogul Is Still a Hometown Hero

COUDERSPORT, Pa. — The owner of one of the most popular diners in town sent the first flower arrangements to John Rigas’ office. Her neighbors followed with daisies and potted plants, sent from all over this wooded hamlet, population 3,000.

Their messages offered love, support and prayers to the cable TV magnate whose company, Adelphia Communications Corp., faces a federal investigation and 18 shareholder lawsuits alleging securities fraud.

But in contrast to Houston, where protesters marched on Enron Corp.’s headquarters after the energy company collapsed, in this small western Pennsylvania town Rigas remains a hero, if not a saint, because of decades of good deeds.

Only three weeks ago Adelphia disclosed some questionable, Enron-like accounting practices. Wall Street swiftly wiped out almost two-thirds of Adelphia’s stock value. Yet as Adelphia scrambles to survive by selling off cable franchises, including some in Los Angeles, residents here are rallying around Rigas, the slight, stooped 77-year-old cable pioneer.

“He’s our Greek god,” said Shirlee Leete, a council member, antiques shop owner and local journalist who since 1968 has written about the folksy, white-haired son of Greek immigrants. “People here feel a certain element of fear about the future and what might happen, but mostly they feel trust.”

Like hundreds of other locals, Leete lost money investing in Adelphia and an affiliated fiber-optic phone company that filed for bankruptcy protection last month.

But over coffee at Kaye’s Hometown Restaurant on Main Street, Leete fought back tears as she thought of the pressure Rigas faces. “I lost thousands of dollars in [his companies], but I have faith it will all be fine because of John,” Leete said. “Integrity is his middle name.” She even started a “prayer chain” for Rigas at local churches.

Loyalties run deep in this town with two stoplights and only one taxicab, where waitresses know customers by their first names and Boy Scouts collect syrup from maple trees near Main Street.

It’s not only that Rigas provides 2,400 jobs, keeping the region from becoming an economic sinkhole. He’s also a mythical caretaker, who sends Adelphia crews onto the streets to plow driveways in the harsh winters and to do landscaping work in the spring. He gives jobs to those who ask and routinely lends money to families in need, never expecting to be paid back.

Rigas’ wealth soared in the late ‘90s when Adelphia had a dizzying run-up, its stock jumping seventeenfold. On paper he was a billionaire. Bankers were eager to lend him money during a frenzied consolidation that sent cable values flying.

In 1999, Rigas bought Century Communications Corp., Los Angeles’ largest cable provider. The deal doubled Adelphia’s size and took it far afield of its small and mid-size cable markets.

Now shareholders accuse the Rigases of misleading them by secretly securing loans for as much as $3 billion, guaranteed by Adelphia, through family partnerships. The family apparently used the money to buy stocks and bonds in Adelphia, gaining control of the nation’s sixth-largest cable provider.

But locals say that if bad things happened, it was the fault of big-city lenders that permitted Adelphia and the Rigases to over-borrow. Or they blame Rigas’ sons, with their Ivy League degrees and oversized ambitions, who expanded the company too big too fast.

“Maybe the boys tried too hard to prove themselves to Dad,” said Chris Schmoyer, owner of Jack’s Steak & Seafood restaurant.

Schmoyer has a soft spot for John Rigas. She remembers when she split open her leg sliding into second base as a kid. She received speedy medical service--and 63 stitches--only after her father called Rigas, who was on the hospital board. “He came and sat with me,” said Schmoyer, whose two sons work for Adelphia. “He has a gift for giving, and what you give comes back to you.”

Adelphia is critical to surrounding Potter County, which derives 10% of its tax dollars from the company. “They’ll land on their feet,” said County Commissioner Ken Wingo. “When they get more information out, that will calm these fears.”

Very few facts have come out of Adelphia since the crisis began. Some townsfolk are uneasy because John Rigas, a regular at eateries around town, hasn’t shown his face in weeks, staying holed up at headquarters on Main Street.

An important banker in town believes Adelphia is like any other company that must take big risks with other people’s money to beat the competition. “A lot of people in town don’t understand that it’s a tough, cutthroat world out there. It’s not Mayberry,” said Charles Updegraff, chief executive of Citizens Trust Co., the local bank of which John Rigas sits on the board.

Rigas grew up 40 miles away in Wellsville, N.Y., above his family’s Texas Hot diner, which is run by his brother Gus today. He fought in World War II and was among the troops who landed at Normandy. Although educated as an engineer, in 1952 he bought the movie theater on Main Street here and the local cable franchise.

He and Gus strung cable wires from telephone poles and sold service door-to-door until 1983, when John bought out his brother so his three sons could join the business.

Rigas, who declined to be interviewed for this article, loves to regale listeners with tales of his early brushes with financial disaster. He overdrew his bank account to buy that first cable franchise for $300. In the late 1960s he almost defaulted on a $25,000 loan before being bailed out by one of his employees, who gave him the money she had just inherited.

“There’s been many times when he’s come close to losing it all,” said Francis Castano, a retired dentist whose mother was Adelphia’s first employee. “The company’s strong cash flow always allowed them to be . . . just one step ahead of the creditors. They’ve learned to live with it.”

Even as his wealth grew, Rigas remained loyal to his small town. He bought out destitute farmers and wound up with 10,000 acres, which he planted with Christmas trees, corn and sunflowers. He also bought an abandoned school that his four children attended decades ago and converted it into Adelphia’s headquarters.

Though storefronts are boarded up in nearby towns such as Painted Post and Port Allegany, Main Street here is postcard perfect. It has lovingly restored brick buildings and Victorian facades freshly painted wintergreen and burgundy under the direction of Rigas’ historically minded wife, Doris.

“People have become so dependent, with the attitude that ‘Oh, Adelphia will do it,’ just like in the old steel towns,” Castano said. “The whole area has been lifted to a higher quality, and that is a legacy of Adelphia’s, no matter what happens.”

When an acquisition spree strained Coudersport’s resources, Rigas refused to move Adelphia’s headquarters to Buffalo or Pittsburgh. Instead, he spent $100 million building and renovating offices. An empty silk mill was transformed into command central for the now-troubled phone venture. And a new brick headquarters for Adelphia, the first three-story structure in town, with four imposing marble pillars, is nearly finished.

But expansion also brought urban evils as real estate prices nearly doubled and traffic and parking became problems.

Yet in recent weeks, these complaints have been overshadowed by a much greater--and mostly unspoken--fear that the bubble of prosperity will burst. The local newspaper, the Potter Leader-Enterprise, had three Adelphia stories on its front page last week.

“Everybody is worried that they’ll go belly up, but no one wants to admit it,” said one local business owner.

Despite some doubts about Adelphia, most townspeople are overwhelmingly protective of Rigas. At a local bar, one hometown investor said, “Don’t write a bad word about John, or I’ll hunt you down.”

Townspeople, however, feel less affection for Rigas’ sons.

The town’s favorite is Michael, the oldest, a Harvard law graduate who is in charge of cable operations. He is described as a carbon copy of his father--sweet, soft-spoken and civic-minded.

James, a Stanford law graduate, runs the ailing telephone company and stays behind the scenes. He has a reputation for a volatile temper. The only married son, James has young children and a stately, $7-million Victorian mansion under construction in town that dwarfs neighboring houses.

Tim, a Wharton graduate, is Adelphia’s chief financial officer and deal maker. He also watches over the company’s interest in the Buffalo Sabres hockey team and is the heaviest user of Adelphia’s three private jets.

Locals say James and Tim are like their mother, Doris, who is regarded as demanding, ambitious and materialistic. While John putts around town in a white GMC Envoy, Doris is usually transported by limousine. She has barns full of antiques from around the world and runs an interior design shop that picks Adelphia’s decor. People still are talking about her attempt to return the marble columns for the new headquarters because she didn’t like their grain.

On Tuesday, Adelphia became delinquent with the Securities and Exchange Commission by failing to file its annual report. A few nights earlier, John Rigas’ SUV was parked behind the former school well past dinner time, as Adelphia executives raced to complete the filing.

In the old principal’s office, where Rigas’ secretaries sit, a paper shredder whirled amid gallows humor. One executive popped in for a gum ball and joked about having to produce documents, alluding to the SEC investigation the company faces.

John and Michael Rigas were upstairs on a marathon conference call with board directors, who all have been sued on securities fraud allegations.

Outside on Main Street, it was just another day in Mayberry. A sidewalk sale by local merchants celebrated small-town prosperity, with clowns and balloons and homemade baked goods, as the sun went down on one of the first balmy days of spring.