Rigases Seek to Tap Adelphia Insurance

Adelphia Communications Corp.’s former Chief Executive John J. Rigas and three sons who were board members want to use the cable TV company’s insurance to help pay their legal bills.

Rigas and his sons are asking a federal bankruptcy judge to lift a freeze on Adelphia assets and allow them to tap into $50 million in directors and officers insurance policies to cover “several million dollars” of expected legal bills.

Rigas and sons Timothy, James and Michael face dozens of shareholder suits, a lawsuit by Adelphia and a civil complaint by the Securities and Exchange Commission. John, Timothy and Michael Rigas also face criminal fraud charges. Adelphia sought Chapter 11 bankruptcy protection in June amid more than $20 billion of debt and seven straight years of losses.

“We typically see defendants and potential defendants who haven’t yet been found guilty doing whatever they can to get whatever money they can” to help fund their defense, said Alistaire Bambach, an SEC lawyer.

In court papers filed Friday, Rigas and his sons said they should receive proceeds from the policies to ensure their rights “are not substantially and irreparably harmed.” The insurance doesn’t cover criminal defense costs, the filing said.

A hearing on the Rigases’ request is scheduled for Oct. 8 before U.S. Bankruptcy Judge Robert Gerber in Manhattan.

Lawrence G. McMichael, a lawyer for the Rigases, said: “We filed the motion to get an assurance for the directors and officers insurance carriers that there’s no bankruptcy law reason why they shouldn’t honor their obligations.”

Marc Abrams, Adelphia’s bankruptcy lawyer, didn’t immediately return a request for comment. Daniel Golden, a lawyer for Adelphia bondholders, didn’t return a call.

Adelphia, based in Coudersport, Pa., recently sued John Rigas and family members, claiming they used company money to buy and improve New York apartments, a golf course and other property.

Separately, Adelphia had a loss of $101.8 million, or 41 cents a share, in June on revenue of $281.9 million, it said in a filing with the U.S. Bankruptcy Court in New York. In July, Adelphia had a loss of $72.1 million, or 29 cents a share, on $269.9 million in revenue. Interest expense for the two months was $130.2 million.