Adelphia Communications Corp. moved debt and cash to entities owned by the Rigases to minimize borrowing costs, a former employee testified Wednesday in the fraud trial of John Rigas, two of his sons and a fourth former executive.
However, James Helms added that the transfers cut borrowing costs not specifically for Adelphia, but for the parties to the company's centralized cash accounts. These included Rigas family entities as well as Adelphia.
"If the sole purpose was just to save the entire group money, that's what we did," said Helms.
Prosecutors have alleged that by moving debt from Adelphia's books to those of the Rigases, the defendants deceived investors and creditors about the company's finances. Adelphia, which is based in Greenwood Village, Colo., ultimately guaranteed the debt that was moved from its books to those of the Rigases. They have charged that the Rigases "looted" the company by having its cash transferred to their accounts.
Defense attorneys have argued throughout the trial that the transfers represent borrowings that the Rigases planned to repay.
In questioning Helms Wednesday, a lawyer for Michael Mulcahey pursued a new tack for the defense: that the transfers of debt and cash were meant to more effectively manage the businesses.
The strategy of debt management that Helms described Wednesday underscores the complexity of the Rigas finances and how intertwined they were with Adelphia's. Adelphia and the Rigas entities shared a cash management system made up of bank accounts, according to earlier testimony.
Different entities paid different interest rates on debt. The rates were determined partly by the debt levels and cash flows of the entities, said Helms. At the end of the quarter, the treasury group sometimes moved debt or cash between entities so as not to exceed certain ratios that lending covenants required, Helms testified.
Michael and Timothy Rigas and former Adelphia assistant treasurer Michael Mulcahey are on trial along with John Rigas.
Adelphia Communications Corp
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