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. Last Updated: 07/27/2016

Adelphia Chief Quits as SEC Closes In

NEW YORK -- Cable pioneer John Rigas said Wednesday he would resign as chief executive of Adelphia Communications Corp. after 50 years at the cable operator's helm, under the cloud of a U.S. government investigation into its accounting practices and off-balance sheet dealings.

The No. 6 cable operator also said it would conduct an investigation of issues raised in connection with the preparation of its delayed annual reports. It added that the audit being conducted by Deloitte & Touche would be suspended until the company's investigation is complete.

The company faces the possibility of Nasdaq delisting its shares a result of the delay of its annual report. A Nasdaq hearing was scheduled for Thursday. The delayed report could also constitute a breach of some its debt and credit agreements.

The investigation comes six weeks after the company disclosed it guaranteed $2.3 billion in loans to partnerships controlled by the Rigas family, which founded the company in 1952.

The family has said it used some of the money from the loans to buy an undisclosed amount of Adelphia shares. Such information is expected to be included in the annual report. The U.S. Securities & Exchange Commission has launched a formal investigation.

Investors have become wary of any accounting issue, or balance-sheet issues, since the spectacular collapse of energy trading company Enron Corp., whose off-balance sheet transactions are believed to have been used to hide debt and enhance earnings.

"I have concluded that Adelphia needs fresh, independent leadership, and that after half a century at the helm the time is right for me to step down," Rigas said in a statement.

Rigas was named chairman emeritus and will remain on the company's board of directors.

The company said it hired attorney David Boies of the firm Boies, Schiller & Flexner to advise it in connection with its investigation and other matters. Boies' client list has included music sharing software company Napster and the U.S. government in its antitrust suit against Microsoft.

Rigas will be replaced by Erland Kailbourne, an independent director at Adelphia since 1999 and chairman of the company's audit committee. Previously he was CEO of Fleet National Bank's New York region.

On Monday, Leonard Tow, Adelphia's largest shareholder outside the Rigas family, said he would seek to have himself and two other executives appointed to the company's board of directors, citing concern over Adelphia's recent disclosures.

Last month a dissident group of shareholders sought to pressure Adelphia's board to allow Tow to assume day-to-day control over the company, a largely symbolic gesture since the Rigas family has voting control of the company.

Adelphia said last week it would sell a number of cable systems representing nearly half of its subscriber base in an effort to pare down its debt, which totaled $14.7 billion according to its preliminary balance sheet issued in March.

Earlier this month, the company said it would fold in $1.6 billion in off-balance-sheet deals, leading to a restatement of earnings statements going back to 1999.