Shareholders sued Adelphia Communications Corp. in U.S. Bankruptcy Court on Thursday in an effort to free the troubled cable television company from "continued domination" by its indicted founder, John Rigas.
The lawsuit, brought by an equity shareholders committee, asks a bankruptcy judge to order the company to hold an annual shareholders meeting to vote on a new slate of directors and to bar votes by Rigas and other family members. The last annual meeting was held in August 2001, eight months before an accounting scandal unfolded at Adelphia that led to its filing for Chapter 11 bankruptcy.
Thursday's lawsuit was triggered in part by Adelphia's recent negotiations to hire as chief executive and chief operating officer two former top executives of cable operator AT&T; Broadband. In a letter in late December to the Adelphia board, the equity committee charged that the proposed employment contracts are too generous and reward the two executives for exiting bankruptcy protection quickly rather than maximizing the more than $5.8 billion in equity value that remains.
"We've asked the board not to act, but we fear they are about to," said Norman Kinel, attorney for the equity committee.
The Adelphia board was slated to vote on the new management team at a regularly scheduled meeting Wednesday, but instead it worked on revising the employment contracts after the terms were unfavorably reviewed in the media.
Under the proposed employment contracts, Adelphia would have paid William Schleyer and Ronald Cooper about $65 million combined over 18 months as CEO and COO respectively.
A spokesman for Adelphia, Eric Andrus, said he had no comment on the committee's lawsuit and said negotiations with Schleyer and Cooper are continuing.
The suit claims that four of Adelphia's six directors are tainted because they served the company when Rigas and his three sons allegedly used the company to borrow more than $3 billion.
A federal judge Thursday set a Jan. 5, 2004, trial date for Rigas and three other former executives indicted in the case. A fifth executive, James Brown, pleaded guilty.