Rigas: Latest Addition to Family Business Hall of Shame
In 1952, John Rigas, 76, founded what has become Adelphia Communications, the nation’s sixth largest cable television company. His three sons became top ranking executives at the firm. Father, sons and son-in-law were a majority of the board and the family owned about 24% of the publicly- traded company.
Unfortunately, the family has engaged in practices that violate fundamental principles that we advocate for all family businesses, whether public or private.
One is the principle of transparency. The Rigas family borrowed around $2.5 billion from banks with the company guaranteeing the loans but not disclosing that guarantee on its books. “…hefty off-the-books loans, granted in a way that leaves Adelphia and its investors holding the bag in case the Rigas's default, cast the family…in unflattering light,” said the New York Times. As the case has unfolded, the extent to which the Rigas family hid information became a flood. The light revealed not just unflattering but disgusting behavior.
Second is the principle of avoiding conflict of interest. The Rigas family is apparently guilty in a laundry list of self-dealing situations.
As one financial analyst put it: the Rigas were “extremely aggressive in pursuing their own interest.” Their punishment has been swift and sure. Removed as officers and directors of the company, they’ve lost over a billion of the family’s net worth. Civil and criminal actions are likely. Unfortunately, Adelphia’s other stockholders also lost virtually their entire investment.
Once, the Rigas family seemed to represent the positives about family business. Now it is revealed how thoroughly they represent the dark side---cooking books, self-dealing, nepotism, insulating themselves from accountability---and hiding it all behind the veneer of family. Such behavior is what gives family business a bad name. Like the little girl in the nursery rhyme, when family businesses are good, they can be very, very good---but when they are bad, they are horrid. Why a family of accomplishment and wealth feels that it must cheat the system speaks to greed and the worst sort of family values.
We like to point out in The Family Business Advisor the strengths and positive dimensions of family business. We are similarly obligated to place Adelphia Communications and the Rigas family in The Family Business Hall of Shame.
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