WEBVTT 00:00:00.000 --> 00:00:02.640 I want you to picture a town. And I don't mean 00:00:02.640 --> 00:00:04.559 a suburb or, you know, a bustling little city. 00:00:04.660 --> 00:00:07.419 I mean a town so small that if you sneeze on 00:00:07.419 --> 00:00:09.619 Main Street, someone on the other side of the 00:00:09.619 --> 00:00:12.960 borough probably says, bless you. Right. We are 00:00:12.960 --> 00:00:16.739 talking about Cootersport, Pennsylvania. It's 00:00:16.739 --> 00:00:19.039 nestled way up in the northern part of the state, 00:00:19.160 --> 00:00:22.920 surrounded by forests, very rural, very quiet. 00:00:23.260 --> 00:00:25.440 It's absolutely the kind of place that feels 00:00:25.440 --> 00:00:27.480 frozen in time. You have the brick buildings, 00:00:27.660 --> 00:00:30.219 the local diner, the sense that everybody knows 00:00:30.219 --> 00:00:32.500 everybody's business because, frankly, there 00:00:32.500 --> 00:00:34.619 isn't that much business to know. Exactly. It 00:00:34.619 --> 00:00:37.140 is the last place on Earth you would expect to 00:00:37.140 --> 00:00:39.439 be the epicenter of one of the largest, most 00:00:39.439 --> 00:00:41.759 catastrophic financial collapses in American 00:00:41.759 --> 00:00:45.539 history. But right there in that tiny town was 00:00:45.539 --> 00:00:47.979 the headquarters of Adelphia Communications Corporation. 00:00:48.600 --> 00:00:50.939 It really is a story of incredible contrast. 00:00:51.299 --> 00:00:53.939 On one side, you have this quaint, almost Norman 00:00:53.939 --> 00:00:56.159 Rockwell style setting. And on the other, you 00:00:56.159 --> 00:00:58.700 have a multibillion dollar empire that imploded 00:00:58.700 --> 00:01:01.240 in a way that, well, it shook Wall Street to 00:01:01.240 --> 00:01:03.479 its core. We are talking about a company that 00:01:03.479 --> 00:01:07.040 started, and I love this detail, with a literal 00:01:07.040 --> 00:01:11.579 investment of $300. 300 bucks. That was it. And 00:01:11.579 --> 00:01:14.640 from that pocket change, it ballooned into a 00:01:14.640 --> 00:01:18.799 cable giant. But when it crashed. It was the 00:01:18.799 --> 00:01:21.859 12th largest bankruptcy by assets in United States 00:01:21.859 --> 00:01:24.439 history. It's a staggering statistic. I mean, 00:01:24.439 --> 00:01:26.599 when you look at the list of major bankruptcies, 00:01:26.599 --> 00:01:30.060 you see these massive faceless conglomerates 00:01:30.060 --> 00:01:32.299 based in skyscrapers in New York or Houston. 00:01:32.500 --> 00:01:35.780 And then you have Adelphia run by a family in 00:01:35.780 --> 00:01:37.379 a town where they probably parked their own cars 00:01:37.379 --> 00:01:38.879 and walked into the office without a security 00:01:38.879 --> 00:01:41.760 detail. That's what we are deep diving into today. 00:01:41.959 --> 00:01:44.379 This isn't just a story about numbers on a spreadsheet. 00:01:44.519 --> 00:01:46.920 It's a story about a family. It's about hubris. 00:01:47.099 --> 00:01:49.079 Oh, yeah. It's about professional hockey teams 00:01:49.079 --> 00:01:51.980 buying thousands of acres of forest just to keep. 00:01:52.140 --> 00:01:55.359 your backyard view pretty, and a fraud that was 00:01:55.359 --> 00:01:59.099 so simple, yet so massive, it's hard to believe 00:01:59.099 --> 00:02:01.659 they thought they'd get away with it. And it's 00:02:01.659 --> 00:02:04.760 a case study in corporate governance, or rather, 00:02:04.879 --> 00:02:08.099 the total lack of it. It touches on the dangers 00:02:08.099 --> 00:02:11.120 of off -balance sheet debt, which sounds dry, 00:02:11.280 --> 00:02:14.900 but I promise you, in this story, it is anything 00:02:14.900 --> 00:02:18.080 but. It's about the psychology of entitlement. 00:02:18.680 --> 00:02:20.800 And before we even get into the crime, we have 00:02:20.800 --> 00:02:23.840 to talk about the name Adelphia. It sounds very 00:02:23.840 --> 00:02:26.539 corporate, maybe a little generic, but it actually 00:02:26.539 --> 00:02:28.580 means something specific, doesn't it? It does. 00:02:28.639 --> 00:02:31.099 It comes from the Greek word for brothers. Brothers. 00:02:31.199 --> 00:02:34.150 Yeah. The company was founded by John Regas and 00:02:34.150 --> 00:02:37.169 his brother Gus. And honestly, the irony of that 00:02:37.169 --> 00:02:39.389 name becomes absolutely crushing by the end of 00:02:39.389 --> 00:02:41.310 this story. This was a company built entirely 00:02:41.310 --> 00:02:44.530 on family bonds, on that tight knit blood is 00:02:44.530 --> 00:02:46.909 thicker than water trust. Right. The idea that 00:02:46.909 --> 00:02:49.629 we're in this together. Exactly. But ultimately, 00:02:49.770 --> 00:02:51.789 it was that inability to separate the family 00:02:51.789 --> 00:02:54.169 from the corporation that caused the entire structure 00:02:54.169 --> 00:02:56.449 to collapse. They treated a publicly traded company 00:02:56.449 --> 00:02:58.689 like it was still just the two brothers splitting 00:02:58.689 --> 00:03:01.189 a pizza. That is the ultimate blurring of lines. 00:03:01.789 --> 00:03:04.629 My money, the company's money. What's the difference? 00:03:05.009 --> 00:03:06.870 Well, it turns out the difference was about $2 00:03:06.870 --> 00:03:10.530 .3 billion. A very expensive and very illegal 00:03:10.530 --> 00:03:13.389 difference. So here is our mission for this deep 00:03:13.389 --> 00:03:17.550 dive. We are going to unpack how this massive 00:03:17.550 --> 00:03:20.110 cable empire crumbled. We're going to look at 00:03:20.110 --> 00:03:22.530 the Christmas tree. Yes, actual Christmas trees 00:03:22.530 --> 00:03:24.409 played a role in the investigation. It's true. 00:03:24.530 --> 00:03:26.590 We're going to look at the hidden loans and we're 00:03:26.590 --> 00:03:29.430 going to try to understand the mindset of a family 00:03:29.430 --> 00:03:32.289 that felt they were above the law or perhaps 00:03:32.289 --> 00:03:34.770 that they just didn't think the law applied to 00:03:34.770 --> 00:03:37.389 family business. And we need to answer a fundamental 00:03:37.389 --> 00:03:40.610 question. How does a man who starts with $300 00:03:40.610 --> 00:03:43.930 and builds the American dream end up dying with 00:03:43.930 --> 00:03:46.969 a legacy of fraud and a prison sentence? To understand 00:03:46.969 --> 00:03:49.090 that, we have to go back to the very beginning, 00:03:49.270 --> 00:03:52.530 1952. The post -war boom. The American dream 00:03:52.530 --> 00:03:54.930 is in full swing. It really was the quintessential 00:03:54.930 --> 00:03:57.270 origin story. You have John and Gus Regas. They 00:03:57.270 --> 00:03:59.090 are in cooter sport. And you have to remember, 00:03:59.189 --> 00:04:02.669 in 1952, television itself is still this exploding 00:04:02.669 --> 00:04:05.750 medium. But in rural areas, getting a signal 00:04:05.750 --> 00:04:07.650 is a nightmare. Oh, for sure. You had mountains. 00:04:07.689 --> 00:04:10.599 You had distance. Right. No satellite, no internet. 00:04:10.780 --> 00:04:12.879 If you didn't have a line of sight to the broadcast 00:04:12.879 --> 00:04:15.900 tower, you were staring at static. Precisely. 00:04:16.120 --> 00:04:19.060 So the opportunity was in community antenna television, 00:04:19.300 --> 00:04:21.139 which is what cable was back then. You put a 00:04:21.139 --> 00:04:23.300 big antenna on top of a mountain where the signal 00:04:23.300 --> 00:04:26.139 is good, run a wire down the hill, and charge 00:04:26.139 --> 00:04:28.199 people a few bucks a month to hook into it. And 00:04:28.199 --> 00:04:30.839 that's what they did. They bought a local cable 00:04:30.839 --> 00:04:35.279 franchise in Cootersport. For exactly $300. Which 00:04:35.279 --> 00:04:39.660 is an incredibly modest sum, even for 1952. Adjusted 00:04:39.660 --> 00:04:42.100 for inflation, we are talking about maybe, what, 00:04:42.199 --> 00:04:44.480 $3 ,000 today? Something like that. It was a 00:04:44.480 --> 00:04:47.800 small bet. A tiny bet. But John Regas was diligent. 00:04:48.019 --> 00:04:50.439 He was a local guy. He knew the people. And he 00:04:50.439 --> 00:04:52.860 provided a service they desperately wanted. He 00:04:52.860 --> 00:04:54.959 was connecting them to the world. But they didn't 00:04:54.959 --> 00:04:56.959 just sit on Cootersport. I mean, you can't build 00:04:56.959 --> 00:04:59.180 a multi -billion dollar empire just by serving 00:04:59.180 --> 00:05:01.819 one small town. They had a strategy. They did. 00:05:02.360 --> 00:05:04.680 Over the next few decades, they engaged in what 00:05:04.680 --> 00:05:07.480 we call a roll -up strategy. The cable industry 00:05:07.480 --> 00:05:09.860 is all about scale. It costs a lot of money to 00:05:09.860 --> 00:05:11.819 lay the wire. That's your capital expenditure. 00:05:12.019 --> 00:05:15.079 Right. Huge upfront cost. Huge. But once the 00:05:15.079 --> 00:05:17.399 wire is there... Adding a new customer is cheap. 00:05:17.600 --> 00:05:19.720 So the more customers you have, the better your 00:05:19.720 --> 00:05:22.319 margins. The whole game is density. So they just 00:05:22.319 --> 00:05:23.980 started buying up other little cable companies 00:05:23.980 --> 00:05:26.519 in neighboring towns. Exactly. They aggressively 00:05:26.519 --> 00:05:29.259 acquired other systems. They expanded out of 00:05:29.259 --> 00:05:31.600 Cootersport into other parts of Pennsylvania, 00:05:31.879 --> 00:05:34.620 then New York, and eventually all across the 00:05:34.620 --> 00:05:37.920 country. They were consolidating a very fragmented 00:05:37.920 --> 00:05:40.300 market. And to fuel that kind of growth, you 00:05:40.300 --> 00:05:42.660 need capital. You can't just do that on the profits 00:05:42.660 --> 00:05:45.560 from... basic cable subscriptions. No way. You 00:05:45.560 --> 00:05:48.040 need Wall Street money. So they went public. 00:05:48.240 --> 00:05:50.939 They listed the company on the Nasdaq under the 00:05:50.939 --> 00:05:54.779 ticker symbol ADLAC. Now, this is a pivotal moment 00:05:54.779 --> 00:05:57.579 because once you go public, the rules change 00:05:57.579 --> 00:06:00.060 completely. Completely. You aren't just John 00:06:00.060 --> 00:06:02.199 and Gus running a business anymore. You have 00:06:02.199 --> 00:06:05.420 shareholders. You have the SEC. You have quarterly 00:06:05.420 --> 00:06:08.420 earnings calls. You have a fiduciary duty to 00:06:08.420 --> 00:06:11.160 people who don't have the last name Regus. And 00:06:11.160 --> 00:06:13.180 this is where the friction started. even if it 00:06:13.180 --> 00:06:16.000 wasn't visible yet. The Regas family retained 00:06:16.000 --> 00:06:18.439 control both in terms of management and voting 00:06:18.439 --> 00:06:21.699 power, but they were now playing with other people's 00:06:21.699 --> 00:06:23.980 money. But for a long time, nobody cared about 00:06:23.980 --> 00:06:25.860 the governance, right? Because the stock was 00:06:25.860 --> 00:06:28.079 doing great, the company was growing. That's 00:06:28.079 --> 00:06:29.879 the golden rule of Wall Street. As long as the 00:06:29.879 --> 00:06:32.279 line on the chart is going up, nobody asks too 00:06:32.279 --> 00:06:34.829 many questions. And for Adelphia... That line 00:06:34.829 --> 00:06:37.769 went up for a long, long time. If we fast forward 00:06:37.769 --> 00:06:40.990 to the peak around 1998 to 2001, they were a 00:06:40.990 --> 00:06:43.050 monster. Give us the stats. How big do they get? 00:06:43.170 --> 00:06:46.209 By 1998, they had over 2 million subscribers. 00:06:46.589 --> 00:06:48.329 They were one of the largest cable providers 00:06:48.329 --> 00:06:50.509 in the United States. And they weren't just doing 00:06:50.509 --> 00:06:53.129 TV anymore. They had diversified. Right, because 00:06:53.129 --> 00:06:56.410 the late 90s was the dot -com boom. Cable wasn't 00:06:56.410 --> 00:06:58.470 just about sitcoms anymore. It was about the 00:06:58.470 --> 00:07:00.389 pipes for the Internet. The high -speed connection 00:07:00.389 --> 00:07:03.889 was everything. Exactly. In 1989, they established 00:07:03.889 --> 00:07:06.449 Adelphia Media Services for commercial opportunities 00:07:06.449 --> 00:07:10.209 and advertising. Then in 1991, they launched 00:07:10.209 --> 00:07:13.240 Adelphia Business Solutions. This was their play 00:07:13.240 --> 00:07:15.420 for the B2B market, providing high -speed internet, 00:07:15.660 --> 00:07:17.959 phone services, voice messaging for businesses. 00:07:18.399 --> 00:07:21.139 They were positioning themselves as a full -service 00:07:21.139 --> 00:07:23.839 telecommunications giant. It really felt like 00:07:23.839 --> 00:07:25.800 they had made it. If you were looking at them 00:07:25.800 --> 00:07:27.779 from the outside, this was a massive success 00:07:27.779 --> 00:07:31.300 story. A small -town family makes good, conquers 00:07:31.300 --> 00:07:33.759 the industry, and becomes a major player on the 00:07:33.759 --> 00:07:36.519 national stage. And that success masked the rot. 00:07:36.740 --> 00:07:39.120 When you were growing that fast, acquiring companies 00:07:39.120 --> 00:07:41.819 left and right, Your balance sheet gets incredibly 00:07:41.819 --> 00:07:44.980 complicated. And in that complexity, it is very, 00:07:45.019 --> 00:07:47.040 very easy to hide things. And that brings us 00:07:47.040 --> 00:07:49.939 to the turning point. The year 2002. The bubble 00:07:49.939 --> 00:07:52.899 bursts. The year everything changed. And it happened 00:07:52.899 --> 00:07:55.439 so fast. So set the scene for us. It's March 00:07:55.439 --> 00:07:58.480 27, 2002. Adelphi officials hold a conference 00:07:58.480 --> 00:08:00.360 call or they put out a press release. Yeah. And 00:08:00.360 --> 00:08:01.740 I imagine the analysts on the other end of the 00:08:01.740 --> 00:08:04.180 line nearly dropped their phones. It was an absolute 00:08:04.180 --> 00:08:06.860 bombshell. They announced that there was a massive 00:08:06.860 --> 00:08:09.920 discrepancy in their financials. We aren't talking 00:08:09.920 --> 00:08:12.259 about a rounding error or some bad forecast. 00:08:12.560 --> 00:08:16.959 No. We are talking about $2 .3 billion in unrecorded 00:08:16.959 --> 00:08:19.040 debt. Okay, we need to pause and really unpack 00:08:19.040 --> 00:08:24.290 this. $2 .3 billion. How do you hide that? It's 00:08:24.290 --> 00:08:26.069 not like losing your keys in the couch cushions. 00:08:26.370 --> 00:08:29.490 This is the GDP of a small country. How does 00:08:29.490 --> 00:08:32.830 a public company keep $2 .3 billion off the books? 00:08:33.090 --> 00:08:34.950 This is where we have to get a little technical 00:08:34.950 --> 00:08:37.490 because the mechanism itself is fascinatingly 00:08:37.490 --> 00:08:39.730 simple in a way. It involves something called 00:08:39.730 --> 00:08:42.330 co -borrowing. Co -borrowing. It sounds innocent 00:08:42.330 --> 00:08:44.570 enough, like co -signing a loan for your kid's 00:08:44.570 --> 00:08:47.289 first car. In principle, it is similar, but on 00:08:47.289 --> 00:08:49.850 a massive corporate scale. Here's how it worked. 00:08:50.190 --> 00:08:52.409 Adelphia, the public company, had access to huge 00:08:52.409 --> 00:08:54.750 lines of credit from banks to fund their operations 00:08:54.750 --> 00:08:57.429 and acquisitions. Okay, standard stuff. But the 00:08:57.429 --> 00:09:00.149 Regas family also had private companies, entities 00:09:00.149 --> 00:09:02.529 that were not part of Adelphia but were owned 00:09:02.529 --> 00:09:04.929 by the family, organized under a trust called 00:09:04.929 --> 00:09:07.110 Highland Holdings. Okay, so you have the public 00:09:07.110 --> 00:09:09.110 company bucket and the private family bucket. 00:09:09.269 --> 00:09:10.990 Yeah. They should be separate, church and state. 00:09:11.289 --> 00:09:14.039 Precisely. But Adelphia and the family entities 00:09:14.039 --> 00:09:16.600 entered into these co -borrowing agreements. 00:09:17.100 --> 00:09:19.379 This meant that the family's private entities 00:09:19.379 --> 00:09:21.799 could draw down cash from Adelphia's corporate 00:09:21.799 --> 00:09:24.639 credit lines. So the family is taking cash out 00:09:24.639 --> 00:09:27.740 of the public company's credit card? Yes. But 00:09:27.740 --> 00:09:31.399 here is the trick and the fraud. Adelphia was 00:09:31.399 --> 00:09:35.210 jointly and severally liable for all of it. That 00:09:35.210 --> 00:09:37.669 means if the family took out a billion dollars 00:09:37.669 --> 00:09:39.690 through their private company and couldn't pay 00:09:39.690 --> 00:09:42.090 it back, Adelphia, the public company and its 00:09:42.090 --> 00:09:44.889 shareholders was on the hook for the entire amount. 00:09:45.190 --> 00:09:47.889 OK, that sounds really risky. But if they disclosed 00:09:47.889 --> 00:09:50.149 it properly, is it illegal? That's the catch. 00:09:50.289 --> 00:09:52.470 They didn't disclose the extent of it properly. 00:09:52.730 --> 00:09:54.990 On Adelphia's balance sheet, they wouldn't show 00:09:54.990 --> 00:09:57.110 the full amount of the debt as a liability for 00:09:57.110 --> 00:09:59.570 the company. They treated it as if it were the 00:09:59.570 --> 00:10:01.669 family's debt, even though the company was legally 00:10:01.669 --> 00:10:03.610 on the hook for it. They were netting it out, 00:10:03.649 --> 00:10:06.029 hiding the true leverage. So investors are looking 00:10:06.029 --> 00:10:08.149 at Adelphia thinking, oh, they have X amount 00:10:08.149 --> 00:10:11.049 of debt. That seems manageable. But in reality, 00:10:11.250 --> 00:10:14.470 they have X plus two point three billion dollars 00:10:14.470 --> 00:10:17.289 of debt that could drop on their heads any moment. 00:10:17.470 --> 00:10:19.669 Exactly. It completely distorted the financial 00:10:19.669 --> 00:10:21.509 health of the company. It made Adelphia look 00:10:21.509 --> 00:10:23.830 much more stable and much less risky than it 00:10:23.830 --> 00:10:25.970 actually was. It's like finding out your spouse 00:10:25.970 --> 00:10:28.789 has a. secret second mortgage on the house that 00:10:28.789 --> 00:10:31.009 they never told you about, but you are legally 00:10:31.009 --> 00:10:33.490 required to pay it if they stop making payments. 00:10:33.710 --> 00:10:37.070 That is a very, very apt analogy. And the question 00:10:37.070 --> 00:10:40.169 then becomes, what was the family doing with 00:10:40.169 --> 00:10:43.830 all that money? Because $2 .3 billion is a lot 00:10:43.830 --> 00:10:45.750 of spending money. It wasn't just going into 00:10:45.750 --> 00:10:47.870 building out the cable network. Oh, this is where 00:10:47.870 --> 00:10:50.009 it gets really interesting. And frankly, this 00:10:50.009 --> 00:10:51.970 is the part that makes you angry. Because it 00:10:51.970 --> 00:10:53.909 wasn't just bad business investments. It wasn't 00:10:53.909 --> 00:10:56.169 like they were trying to invent a new type of 00:10:56.169 --> 00:10:59.529 cable box and failed. It was a personal piggy 00:10:59.529 --> 00:11:02.279 bank. The investigation revealed that the Regas 00:11:02.279 --> 00:11:04.960 family was using these public funds drawn from 00:11:04.960 --> 00:11:07.840 these co -borrowing agreements for illegitimately 00:11:07.840 --> 00:11:11.139 purchasing personal luxuries and assets. The 00:11:11.139 --> 00:11:13.820 lines were just gone. Let's look at the shopping 00:11:13.820 --> 00:11:16.500 list. Because when the feds raided the place 00:11:16.500 --> 00:11:18.559 and went through the books, they found some items 00:11:18.559 --> 00:11:21.059 that just make you shake your head. First off, 00:11:21.159 --> 00:11:24.730 17 company cars. Which is excessive, certainly, 00:11:24.909 --> 00:11:27.250 but you could almost argue executive transport 00:11:27.250 --> 00:11:29.769 if you squint really hard. But then it gets much 00:11:29.769 --> 00:11:33.129 harder to justify. Christmas trees. Yes, Christmas 00:11:33.129 --> 00:11:35.850 trees. The sources specifically mention Christmas 00:11:35.850 --> 00:11:38.590 trees. Now, I don't know about you, but a nice 00:11:38.590 --> 00:11:42.129 Christmas tree is maybe $100, $200. How many 00:11:42.129 --> 00:11:43.909 trees do you have to buy for it to show up as 00:11:43.909 --> 00:11:46.289 a line item in a federal fraud investigation? 00:11:46.919 --> 00:11:49.200 It implies a massive amount, or perhaps they 00:11:49.200 --> 00:11:51.399 were flying in designer trees from, I don't know, 00:11:51.440 --> 00:11:53.399 Norway for every single property they owned. 00:11:53.559 --> 00:11:57.019 But it speaks to a lack of boundaries. When you 00:11:57.019 --> 00:11:59.740 are using shareholder money to buy holiday decorations 00:11:59.740 --> 00:12:02.220 for your personal homes, you have completely 00:12:02.220 --> 00:12:04.759 lost touch with the concept of fiduciary duty. 00:12:05.080 --> 00:12:07.279 It's the pettiness of it, right? If you're stealing 00:12:07.279 --> 00:12:09.580 billions, why bother stealing the Christmas tree 00:12:09.580 --> 00:12:12.639 money? It shows a mindset of, I own all of this. 00:12:12.740 --> 00:12:15.220 It's all mine. And that mindset is perfectly, 00:12:15.440 --> 00:12:18.250 perfectly... illustrated by the timberland purchase. 00:12:18.429 --> 00:12:20.730 Oh, the Cootersport land purchase. This is my 00:12:20.730 --> 00:12:23.309 favorite example of rich guy insanity in this 00:12:23.309 --> 00:12:25.490 whole story. It is absolutely breathtaking. They 00:12:25.490 --> 00:12:29.509 bought 3 ,600 acres of timberland and they paid 00:12:29.509 --> 00:12:34.450 $26 million for it using company money. And just 00:12:34.450 --> 00:12:37.009 to be clear, Adelphi is a cable company. They 00:12:37.009 --> 00:12:39.750 run wires. They don't log forests. Why on earth 00:12:39.750 --> 00:12:41.730 did they buy this land? According to the investigation, 00:12:42.129 --> 00:12:44.289 the prior motivation was to preserve the view 00:12:44.289 --> 00:12:46.909 in the backyard of John Regas' home. To preserve 00:12:46.909 --> 00:12:49.769 the view. They spent $26 million of other people's 00:12:49.769 --> 00:12:51.370 money so they wouldn't have to look at it. A 00:12:51.370 --> 00:12:55.350 neighbor? A logging truck? It's just wild. It 00:12:55.350 --> 00:12:58.370 suggests the Regas family viewed the public company's 00:12:58.370 --> 00:13:01.629 cash as their own personal wallet. They wanted 00:13:01.629 --> 00:13:04.370 a nice view. The company had cash, so the company 00:13:04.370 --> 00:13:07.139 bought the view. This is the core psychological 00:13:07.139 --> 00:13:10.879 failure here. They didn't see a distinction between 00:13:10.879 --> 00:13:13.500 Adelphia, the corporation, and the Regas family. 00:13:13.899 --> 00:13:16.259 In their minds, they built it, so they owned 00:13:16.259 --> 00:13:19.279 it. Every single penny of it. It's the founder's 00:13:19.279 --> 00:13:22.779 trap. You start it in your garage or with $300 00:13:22.779 --> 00:13:25.000 in Cootersport, and you think it's yours forever, 00:13:25.100 --> 00:13:26.740 even after you take millions from investors. 00:13:27.259 --> 00:13:29.360 You forget that you sold a piece of the soul 00:13:29.360 --> 00:13:31.419 of the company in exchange for that capital. 00:13:31.759 --> 00:13:34.019 And that entitlement didn't stop at land and 00:13:34.019 --> 00:13:36.139 cars. It extended into the world of professional 00:13:36.139 --> 00:13:38.519 sports. And this is where the visibility of the 00:13:38.519 --> 00:13:40.759 fraud became impossible to miss because you can 00:13:40.759 --> 00:13:43.080 hide a loan document in a footnote, but you can't 00:13:43.080 --> 00:13:45.120 hide a hockey arena. Right. Let's talk about 00:13:45.120 --> 00:13:47.320 the sports ventures because nothing says I have 00:13:47.320 --> 00:13:49.740 too much money and power like buying a professional 00:13:49.740 --> 00:13:52.139 sports team. It is the ultimate status symbol 00:13:52.139 --> 00:13:56.299 for the ultra wealthy. In 1997, John Regas bought 00:13:56.299 --> 00:13:59.840 the NHL's Buffalo Sabres. The Sabres. Now, as 00:13:59.840 --> 00:14:02.919 a sports fan. Owning a team sounds cool, but 00:14:02.919 --> 00:14:05.320 from a business perspective, sports teams are 00:14:05.320 --> 00:14:07.360 notoriously difficult investments, aren't they? 00:14:07.379 --> 00:14:09.750 They're often money pits. They are often vanity 00:14:09.750 --> 00:14:12.610 projects. They lose money operationally, but 00:14:12.610 --> 00:14:15.429 gain value as an asset over time. The problem 00:14:15.429 --> 00:14:18.190 was the Sabres were consistently losing money 00:14:18.190 --> 00:14:20.350 at the time Regus bought them. They were bleeding 00:14:20.350 --> 00:14:22.789 cash. So how do you plug the hole in a sinking 00:14:22.789 --> 00:14:25.789 ship? If the team is losing millions every year, 00:14:25.850 --> 00:14:28.070 who pays the players? Well, in a normal world, 00:14:28.250 --> 00:14:30.409 the owner writes a check from his personal funds. 00:14:30.649 --> 00:14:33.370 But in the Regus world, you use the other ship's 00:14:33.370 --> 00:14:36.259 fuel. The investigation found that misappropriated 00:14:36.259 --> 00:14:38.559 Adelphia funds were being used to subsidize the 00:14:38.559 --> 00:14:40.500 hockey team. So they were just siphoning money. 00:14:40.960 --> 00:14:43.019 Directly. Siphoning money from the cable company 00:14:43.019 --> 00:14:45.059 to keep the hockey team afloat. Wait, how did 00:14:45.059 --> 00:14:47.320 they even justify that on the books? Did they 00:14:47.320 --> 00:14:49.799 claim Adelphia was getting some massive advertising 00:14:49.799 --> 00:14:52.440 value from the Sabres? That was the cover story, 00:14:52.580 --> 00:14:55.779 of course. But the amounts were completely disproportionate 00:14:55.779 --> 00:14:58.059 to any marketing value. They were just wiring 00:14:58.059 --> 00:15:00.799 cash to cover payroll and operations, essentially 00:15:00.799 --> 00:15:03.320 treating the cable subscribers in Florida and 00:15:03.320 --> 00:15:05.799 California as the financiers of a hockey team 00:15:05.799 --> 00:15:08.320 in Buffalo. And the consequences of this were 00:15:08.320 --> 00:15:10.919 immediate once the law got involved. Oh, absolutely. 00:15:11.600 --> 00:15:14.019 The day John Regas and his sons were arrested, 00:15:14.279 --> 00:15:17.179 the NHL had to step in immediately. They seized 00:15:17.179 --> 00:15:19.980 control of the franchise. Imagine that. You were 00:15:19.980 --> 00:15:21.980 the owner one day sitting in the luxury box, 00:15:22.100 --> 00:15:24.500 and the next day the league says, nope, we'll 00:15:24.500 --> 00:15:27.100 take the keys, you're going to jail. The team 00:15:27.100 --> 00:15:29.500 remained a ward of the league until 2003 when 00:15:29.500 --> 00:15:32.360 it was eventually sold to Tom Golisano. But it 00:15:32.360 --> 00:15:35.019 wasn't just the team itself. Adelphia tried to 00:15:35.019 --> 00:15:37.559 build a whole sports ecosystem. They wanted to 00:15:37.559 --> 00:15:40.139 be a media mogul, not just a cable provider. 00:15:40.419 --> 00:15:42.299 They had the Empire Sports Network, right? A 00:15:42.299 --> 00:15:46.159 regional channel. Yes. Launched in 1990. A regional 00:15:46.159 --> 00:15:48.320 sports network serving Central and Western New 00:15:48.320 --> 00:15:51.460 York. And they also owned a radio station, WNSA. 00:15:51.679 --> 00:15:54.120 See, that makes sense on paper. Vertical integration. 00:15:54.559 --> 00:15:56.720 You own the cable distribution. You own the TV 00:15:56.720 --> 00:15:58.700 network. You own the team that plays on the network. 00:15:58.899 --> 00:16:01.379 It's what Ted Turner did. It's what Comcast does 00:16:01.379 --> 00:16:04.019 now. It is a sound strategy, provided you are 00:16:04.019 --> 00:16:06.500 paying for it with legitimate capital and the 00:16:06.500 --> 00:16:09.500 businesses are sustainable. But here, the synergy 00:16:09.500 --> 00:16:12.440 was fueled by the same pot of tainted money. 00:16:12.580 --> 00:16:14.759 It was a house of cards. They were propping up 00:16:14.759 --> 00:16:17.259 losing businesses with fraud. And speaking of 00:16:17.259 --> 00:16:19.419 names on buildings, we have to talk about Nashville, 00:16:19.600 --> 00:16:23.559 Tennessee. Ah, yes. The Adelphia Coliseum. In 00:16:23.559 --> 00:16:26.759 1999, they bought the naming rights to the brand 00:16:26.759 --> 00:16:30.259 new stadium for the Tennessee Titans. Now, here's 00:16:30.259 --> 00:16:32.519 what's funny to me. Adelphia wasn't even a big 00:16:32.519 --> 00:16:34.860 player in Nashville, were they? Not really. They 00:16:34.860 --> 00:16:37.100 had a small subsidiary there, Adelphia Business 00:16:37.100 --> 00:16:39.820 Solutions, which was trying to compete with Bell 00:16:39.820 --> 00:16:42.759 South. But buying the stadium rights wasn't about 00:16:42.759 --> 00:16:45.519 local advertising. It was a massive marketing 00:16:45.519 --> 00:16:47.879 play. It was about projecting an image of national 00:16:47.879 --> 00:16:51.000 dominance. It's the ego play. We are big. We 00:16:51.000 --> 00:16:53.580 are powerful. Our name is on an NFL stadium on 00:16:53.580 --> 00:16:56.460 Monday night football. Exactly. It signals to 00:16:56.460 --> 00:16:58.460 Wall Street that you are a tier one company. 00:16:58.820 --> 00:17:01.279 But that image shattered very, very quickly. 00:17:01.539 --> 00:17:05.240 They bought the rights in 1999. By 2002, after 00:17:05.240 --> 00:17:06.960 the scandal broke and they missed a payment, 00:17:07.160 --> 00:17:09.220 the name was stripped off the building. And for 00:17:09.220 --> 00:17:11.279 four years, the stadium didn't even have a sponsor. 00:17:11.380 --> 00:17:14.099 It was just called the Coliseum. It stood as 00:17:14.099 --> 00:17:16.940 a kind of monument to the failure, a blank space 00:17:16.940 --> 00:17:19.140 where the Adelphia name used to be. It was a 00:17:19.140 --> 00:17:21.759 physical reminder of how quickly the empire had 00:17:21.759 --> 00:17:25.269 just evaporated. So we have the cars, the trees, 00:17:25.349 --> 00:17:27.950 the land, the hockey team, the stadium. It's 00:17:27.950 --> 00:17:31.789 all built on this $2 .3 billion lie. But gravity 00:17:31.789 --> 00:17:34.289 always wins. You can't levitate forever. No, 00:17:34.470 --> 00:17:36.589 the crash is inevitable. So let's walk through 00:17:36.589 --> 00:17:38.470 the collapse, because once that thread was pulled, 00:17:38.630 --> 00:17:41.009 the whole sweater unraveled incredibly fast. 00:17:41.329 --> 00:17:43.769 The speed was breathtaking. We go from the revelation 00:17:43.769 --> 00:17:46.529 of the debt in late March 2002 to John Regas 00:17:46.529 --> 00:17:49.009 resigning as CEO in May, just two months later. 00:17:49.170 --> 00:17:51.730 He was indicted for bank fraud, wire fraud, and 00:17:51.730 --> 00:17:54.339 securities fraud. And then... the bankruptcy 00:17:54.339 --> 00:17:58.880 filing. June 26, 2002. As we mentioned at the 00:17:58.880 --> 00:18:02.359 start, this was the 12th largest bankruptcy by 00:18:02.359 --> 00:18:04.970 assets in U .S. history. To give you a sense 00:18:04.970 --> 00:18:08.569 of the scale, they needed a $1 .5 billion loan 00:18:08.569 --> 00:18:11.450 just to restructure under bankruptcy protection, 00:18:11.809 --> 00:18:14.450 just to keep the lights on and the cable signals 00:18:14.450 --> 00:18:16.329 flowing while they figured out the mess. The 00:18:16.329 --> 00:18:18.250 SEC didn't mince words about this, did they? 00:18:18.269 --> 00:18:20.369 They must have been furious. No. They called 00:18:20.369 --> 00:18:22.950 it one of the most extensive financial frauds 00:18:22.950 --> 00:18:25.170 ever to take place at a public company. And you 00:18:25.170 --> 00:18:26.849 have to remember, this is in the era of Enron 00:18:26.849 --> 00:18:29.230 and WorldCom. Right. We are talking about the 00:18:29.230 --> 00:18:31.970 Hall of Shame of the early 2000s. The competition 00:18:31.970 --> 00:18:35.180 for worst fraud was... And Adelphia was right 00:18:35.180 --> 00:18:37.259 up there on the podium. So it goes to trial. 00:18:37.400 --> 00:18:39.079 And this is where the narrative battles play 00:18:39.079 --> 00:18:41.079 out. The federal prosecutors lay it all out. 00:18:41.140 --> 00:18:43.680 They show this complicated cash management system 00:18:43.680 --> 00:18:46.819 that spread money around to hide the debts. Prosecutors 00:18:46.819 --> 00:18:49.380 painted a very clear picture of a family that 00:18:49.380 --> 00:18:51.539 treated the company as their personal fiefdom. 00:18:51.960 --> 00:18:54.559 They proved that distinct from the debt hiding, 00:18:54.779 --> 00:18:57.660 the family had simply looted about $100 million 00:18:57.660 --> 00:19:00.460 specifically for themselves. That's the Christmas 00:19:00.460 --> 00:19:02.440 tree and Timberland money. That wasn't debt support. 00:19:02.559 --> 00:19:05.680 That was just theft. What was the defense? I 00:19:05.680 --> 00:19:08.299 mean, how do you defend against that? I didn't 00:19:08.299 --> 00:19:10.519 know I couldn't buy a forest with company money. 00:19:10.740 --> 00:19:13.180 Their defense was largely that they intended 00:19:13.180 --> 00:19:15.690 to pay it all back. that the lines between the 00:19:15.690 --> 00:19:18.109 family entities and the public company were blurry 00:19:18.109 --> 00:19:20.869 because the family was the company. They argued 00:19:20.869 --> 00:19:23.329 it wasn't malicious theft, but rather sloppy 00:19:23.329 --> 00:19:25.650 accounting and a chaotic corporate structure. 00:19:25.950 --> 00:19:28.609 They tried to portray John Regas as a confused 00:19:28.609 --> 00:19:30.950 old man who was out of his depth with the complex 00:19:30.950 --> 00:19:34.089 financing, not a mastermind criminal. The jury 00:19:34.089 --> 00:19:36.650 didn't buy it. Not at all. The verdict came down 00:19:36.650 --> 00:19:40.299 in June 2005. John Regas, the father, the patriarch, 00:19:40.599 --> 00:19:42.579 he was found guilty of looting and debt hiding. 00:19:42.740 --> 00:19:45.500 He was sentenced to 15 years in prison. And his 00:19:45.500 --> 00:19:48.599 son, Timothy, he was the CFO. Timothy Regas, 00:19:48.619 --> 00:19:51.500 who was the CFO, the one who really should have 00:19:51.500 --> 00:19:53.720 known better regarding the financials, received 00:19:53.720 --> 00:19:58.579 20 years. Wow. That is serious time, especially 00:19:58.579 --> 00:20:01.180 for white -collar crime back then. It is. In 00:20:01.180 --> 00:20:04.220 2007, they reported to the Butner Federal Correctional 00:20:04.220 --> 00:20:06.859 Complex. It was a humiliating... devastating 00:20:06.859 --> 00:20:09.519 end. They were led away in handcuffs, the empire 00:20:09.519 --> 00:20:12.539 in ruins. And here is where I think we need to 00:20:12.539 --> 00:20:15.099 pause and look at the nuance because there is 00:20:15.099 --> 00:20:17.700 a detail here that makes Adelphia different from 00:20:17.700 --> 00:20:20.119 the other big scandals of that time. It's really 00:20:20.119 --> 00:20:22.640 fascinating. Yes. This is the part that fascinates 00:20:22.640 --> 00:20:25.039 legal scholars and psychologists. The New York 00:20:25.039 --> 00:20:28.349 Times made a very, very keen observation. In 00:20:28.349 --> 00:20:30.809 a lot of these fraud cases, think pump and dump, 00:20:30.950 --> 00:20:33.349 the executives know the ship is sinking. They 00:20:33.349 --> 00:20:35.250 see the real numbers. They know it's over. So 00:20:35.250 --> 00:20:38.369 what do they do? They sell. They cash out. They 00:20:38.369 --> 00:20:40.730 exercise their stock options, dump the shares 00:20:40.730 --> 00:20:42.349 on the market while telling everyone else to 00:20:42.349 --> 00:20:44.430 buy. Exactly. They secure their own lifeguards 00:20:44.430 --> 00:20:46.950 while the passengers drown. But the Riggises 00:20:46.950 --> 00:20:48.750 didn't do that. They didn't sell their stock. 00:20:48.950 --> 00:20:51.680 No. They held their stock. They wrote it all 00:20:51.680 --> 00:20:54.500 the way down to zero. In fact, in some cases, 00:20:54.519 --> 00:20:56.819 they were buying more stock or putting up more 00:20:56.819 --> 00:20:59.079 collateral to try and save the share price as 00:20:59.079 --> 00:21:01.680 it was cratering. So wait, if they weren't trying 00:21:01.680 --> 00:21:05.559 to cash out and run, what were they doing? Why 00:21:05.559 --> 00:21:07.980 commit fraud if you aren't going to take the 00:21:07.980 --> 00:21:09.779 money and run? It doesn't quite add up. That 00:21:09.779 --> 00:21:12.559 is the tragic question. The evidence suggests 00:21:12.559 --> 00:21:14.960 they weren't trying to trick investors solely 00:21:14.960 --> 00:21:17.680 to get rich and flee. They were trying to hide. 00:21:18.369 --> 00:21:20.710 inconvenient facts until they could fix them. 00:21:21.210 --> 00:21:23.849 They believed, perhaps delusionally, that if 00:21:23.849 --> 00:21:25.390 they just move the money around long enough, 00:21:25.470 --> 00:21:27.809 the business would grow. The debts could be paid 00:21:27.809 --> 00:21:29.869 off and no one would ever know. So it wasn't 00:21:29.869 --> 00:21:33.170 pure malice. It was delusion, a belief that they 00:21:33.170 --> 00:21:35.490 could still land the plane. The New York Times 00:21:35.490 --> 00:21:38.289 called it a more tragic crime than ordinary looting. 00:21:38.390 --> 00:21:40.430 It implies they really believed their own hype. 00:21:40.569 --> 00:21:42.390 They thought they could fix it. They viewed the 00:21:42.390 --> 00:21:44.730 company as their child. You don't abandon your 00:21:44.730 --> 00:21:47.150 child. You do whatever it takes to save it, even 00:21:47.150 --> 00:21:49.730 if whatever it takes is completely illegal. That 00:21:49.730 --> 00:21:52.529 almost makes it scarier. A crook who knows he's 00:21:52.529 --> 00:21:54.490 a crook might stop when he has enough money. 00:21:54.710 --> 00:21:57.950 A delusional CEO who thinks he's saving the company 00:21:57.950 --> 00:22:01.009 will keep digging the hole until the entire earth 00:22:01.009 --> 00:22:03.470 collapses on top of him. Precisely. It raises 00:22:03.470 --> 00:22:06.349 the question. Is it more dangerous to have a 00:22:06.349 --> 00:22:09.440 greedy leader or a delusional one? The greedy 00:22:09.440 --> 00:22:11.759 leader acts rationally in their own self -interest. 00:22:12.000 --> 00:22:14.480 The delusional leader acts irrationally, believing 00:22:14.480 --> 00:22:17.359 they are the savior. The Reguses went down with 00:22:17.359 --> 00:22:19.799 the ship. They destroyed themselves along with 00:22:19.799 --> 00:22:22.339 the shareholders. They lost everything. And speaking 00:22:22.339 --> 00:22:23.940 of going down with the ship, let's look at what 00:22:23.940 --> 00:22:26.019 happened to John Regus personally. Yeah. Because 00:22:26.019 --> 00:22:28.440 this is where the story takes a turn that feels 00:22:28.440 --> 00:22:30.200 like it's straight out of a movie script. It 00:22:30.200 --> 00:22:33.019 really does. So John Regus goes to prison in 00:22:33.019 --> 00:22:36.059 2007. He is an old man by this point in his 80s. 00:22:36.119 --> 00:22:53.700 Fast forward to 2015. Based on this, he requested 00:22:53.700 --> 00:22:57.240 compassionate release. Which makes sense. If 00:22:57.240 --> 00:22:59.619 you have a month to live, the system often lets 00:22:59.619 --> 00:23:01.980 you go home to die in your own bed rather than 00:23:01.980 --> 00:23:04.599 a prison infirmary. It happens. And the judge 00:23:04.599 --> 00:23:07.059 granted it. Judge Kimball Wood issued the order 00:23:07.059 --> 00:23:10.440 in February 2016. John Regas was released to 00:23:10.440 --> 00:23:12.500 spend his final weeks with his family back in 00:23:12.500 --> 00:23:15.039 Cootersport. It was a mercy release, a final 00:23:15.039 --> 00:23:19.279 act. But he didn't die in six months. No. He 00:23:19.279 --> 00:23:21.220 defied the doctors completely. How long did he 00:23:21.220 --> 00:23:23.279 live after being released? He lived for five 00:23:23.279 --> 00:23:25.579 more years. Five years. He didn't pass away until 00:23:25.579 --> 00:23:29.700 September 2021 at the age of 96. So he essentially 00:23:29.700 --> 00:23:32.180 got a five year reprieve from his prison sentence 00:23:32.180 --> 00:23:34.700 due to a medical prognosis that turned out to 00:23:34.700 --> 00:23:37.500 be quite off the mark. That is. Well, it's something. 00:23:37.700 --> 00:23:40.180 Talk about defying the odds in every sense. He 00:23:40.180 --> 00:23:43.859 survived the rise, the fall, the prison and even 00:23:43.859 --> 00:23:46.460 the terminal diagnosis. It adds another layer 00:23:46.460 --> 00:23:48.660 to the legend, doesn't it? The man who wouldn't 00:23:48.660 --> 00:23:50.920 give up control, wouldn't sell his stock and 00:23:50.920 --> 00:23:53.279 wouldn't even die when he was supposed to. But 00:23:53.279 --> 00:23:56.039 while John was living out his final years back 00:23:56.039 --> 00:23:58.900 in cooter sport. What happened to the company? 00:23:58.980 --> 00:24:01.740 What happened to the 15 ,000 employees who were 00:24:01.740 --> 00:24:04.000 stuck in the middle of all this? That's the collateral 00:24:04.000 --> 00:24:06.779 damage we often forget. The employees didn't 00:24:06.779 --> 00:24:08.619 commit the fraud, but they lived through the 00:24:08.619 --> 00:24:11.849 chaos, the uncertainty. The cleanup was messy 00:24:11.849 --> 00:24:14.670 and took years. A restructuring plan was approved 00:24:14.670 --> 00:24:18.529 in 2004. The new CEO, William Schleyer, had to 00:24:18.529 --> 00:24:21.069 come in and stabilize the ship. He made a point 00:24:21.069 --> 00:24:23.670 to emphasize the relentless effort of the employees 00:24:23.670 --> 00:24:25.910 who kept the cable running while the executives 00:24:25.910 --> 00:24:28.289 were on trial. And in a bankruptcy like this, 00:24:28.410 --> 00:24:31.210 there is always a fight over the scraps. Who 00:24:31.210 --> 00:24:34.089 got paid? Who got left with nothing? The possession 00:24:34.089 --> 00:24:36.470 lenders, the bank lenders, the joint venture 00:24:36.470 --> 00:24:38.349 partners, the big institutional money, they got 00:24:38.349 --> 00:24:40.130 full cash payments. They were made whole. And 00:24:40.130 --> 00:24:42.789 the Regas family, did they salvage anything from 00:24:42.789 --> 00:24:45.450 the wreckage? Zero. The bankruptcy plan explicitly 00:24:45.450 --> 00:24:49.230 stated no payments to claims and equities of 00:24:49.230 --> 00:24:51.130 the Regas family. They were wiped out completely. 00:24:51.309 --> 00:24:53.309 They forfeited their assets to help pay back 00:24:53.309 --> 00:24:55.569 the restitution. And finally, the empire was 00:24:55.569 --> 00:24:58.250 sold off for parts. Adelphia ceased to exist. 00:24:58.569 --> 00:25:02.539 In July 2006. Adelphia sold its assets for $17 00:25:02.539 --> 00:25:07.279 .6 billion to two giants, Comcast and Time Warner 00:25:07.279 --> 00:25:09.799 Cable. So let's translate this for the listener. 00:25:09.859 --> 00:25:12.160 If you were living in an Adelphia service area 00:25:12.160 --> 00:25:15.160 in 2006, maybe in Los Angeles or Cleveland or 00:25:15.160 --> 00:25:18.319 Buffalo. You went to bed one night with an Adelphia 00:25:18.319 --> 00:25:20.660 cable box and you woke up the next morning as 00:25:20.660 --> 00:25:23.759 a Comcast or Time Warner customer. Exactly. Time 00:25:23.759 --> 00:25:26.359 Warner Cable actually distributed about $6 billion 00:25:26.359 --> 00:25:28.920 in shares to the Adelphia stakeholders as part 00:25:28.920 --> 00:25:30.680 of the deal. So there was some recovery for them. 00:25:30.920 --> 00:25:33.380 But the Adelphia name vanished from the bills, 00:25:33.460 --> 00:25:36.480 absorbed into these larger entities. Time Warner 00:25:36.480 --> 00:25:38.819 Cable later became Spectrum, of course. So the 00:25:38.819 --> 00:25:42.279 name is gone. The stadium is renamed. The family 00:25:42.279 --> 00:25:46.190 is disgraced. The founder is dead. But... Are 00:25:46.190 --> 00:25:48.630 they gone? Is the story really over? Not entirely. 00:25:48.690 --> 00:25:50.650 And this is the final surprise that most people 00:25:50.650 --> 00:25:52.630 don't know about this story. The zombie company. 00:25:52.750 --> 00:25:54.769 I love this part of it. You could call it that. 00:25:54.950 --> 00:25:57.809 The Regus family. Specifically, the other brothers 00:25:57.809 --> 00:25:59.710 and family members who weren't in prison established 00:25:59.710 --> 00:26:02.630 a successor company called Zito Media. Zito Media. 00:26:02.769 --> 00:26:04.789 They operate in some of the areas that weren't 00:26:04.789 --> 00:26:07.789 sold to Time Warner and Comcast, specifically 00:26:07.789 --> 00:26:11.109 in Potter County, Pennsylvania. Back in Cootersport. 00:26:11.170 --> 00:26:13.710 Back in Cootersport. In fact, the visual here 00:26:13.710 --> 00:26:16.950 is absolutely striking. Adelphia had built this 00:26:16.950 --> 00:26:19.670 massive, opulent headquarters in Cootersport 00:26:19.670 --> 00:26:22.430 right before the crash. It was called the Taj 00:26:22.430 --> 00:26:25.589 Mahal of Potter County, a symbol of their power. 00:26:25.710 --> 00:26:28.710 And who is in that building now? Let me guess. 00:26:29.289 --> 00:26:32.589 Zito Media. The Regas family is back in the same 00:26:32.589 --> 00:26:34.549 building running a cable company in the same 00:26:34.549 --> 00:26:36.869 town. So the family is still in the cable business. 00:26:37.789 --> 00:26:39.990 In the same town. Yeah. In the same building. 00:26:40.009 --> 00:26:42.509 It's like the ghost of the empire refused to 00:26:42.509 --> 00:26:45.509 leave. It shows a level of resilience or perhaps 00:26:45.509 --> 00:26:48.549 stubbornness that is hard to comprehend. They 00:26:48.549 --> 00:26:51.369 return to their roots on a much, much smaller 00:26:51.369 --> 00:26:53.930 scale, but they are still there. It brings the 00:26:53.930 --> 00:26:56.289 story full circle from Cootersport to the heights 00:26:56.289 --> 00:26:58.529 of Wall Street and all the way back to Cootersport. 00:26:58.650 --> 00:27:01.349 That is wild. It really drives home the point 00:27:01.349 --> 00:27:04.400 that this was. At its core, a local story that 00:27:04.400 --> 00:27:06.500 just got way too big for its own good. I think 00:27:06.500 --> 00:27:08.220 that's the perfect way to put it. So what does 00:27:08.220 --> 00:27:10.359 this all mean? We've looked at the rise, the 00:27:10.359 --> 00:27:13.920 $2 .3 billion fraud, the hockey teams, the prison 00:27:13.920 --> 00:27:16.740 sentences. When you step back. What is the big 00:27:16.740 --> 00:27:18.940 takeaway here? I think a primary lesson is about 00:27:18.940 --> 00:27:21.920 corporate governance and the danger of the family 00:27:21.920 --> 00:27:24.380 business mentality when applied to a public corporation. 00:27:24.839 --> 00:27:27.859 You cannot treat a billion dollar public entity 00:27:27.859 --> 00:27:30.839 like a personal fiefdom. The mechanisms of control, 00:27:31.059 --> 00:27:33.460 the board, the auditors, they all failed to stop 00:27:33.460 --> 00:27:36.140 a family that felt entitled to the cash. They 00:27:36.140 --> 00:27:38.160 failed to ask the hard questions because, well, 00:27:38.240 --> 00:27:40.240 the stock price was high. It's the Christmas 00:27:40.240 --> 00:27:42.980 trees for me. It's the Timberland. It's the idea 00:27:42.980 --> 00:27:45.859 that I built this so I can take it. Take this. 00:27:46.240 --> 00:27:49.160 Even when this belongs to thousands of shareholders. 00:27:49.880 --> 00:27:52.140 It's a warning about what happens when founders 00:27:52.140 --> 00:27:54.539 refuse to transition from being builders into 00:27:54.539 --> 00:27:56.640 being stewards. And believe in your own hype. 00:27:56.740 --> 00:27:58.960 The Timberland Purchase shows a complete detachment 00:27:58.960 --> 00:28:00.940 from reality. They thought they were untouchable. 00:28:01.059 --> 00:28:03.119 They thought the rules of gravity simply didn't 00:28:03.119 --> 00:28:05.779 apply to them. And that leads to our final provocative 00:28:05.779 --> 00:28:07.940 thought for you, the listener. We touched on 00:28:07.940 --> 00:28:09.480 it earlier, but I want you to really think about 00:28:09.480 --> 00:28:13.059 this. The Riguses didn't sell their stock. They 00:28:13.059 --> 00:28:15.680 went down with the ship, believing, however delusionally, 00:28:15.680 --> 00:28:18.359 that they could fix the hidden deck. So as an 00:28:18.359 --> 00:28:21.500 investor or even just an employee, what is more 00:28:21.500 --> 00:28:25.180 dangerous, a CEO who is a calculated crook robbing 00:28:25.180 --> 00:28:28.519 the place blind and planning an escape or a CEO 00:28:28.519 --> 00:28:32.140 who is so delusional, so convinced of their own 00:28:32.140 --> 00:28:34.880 genius that they believe they can hide billions 00:28:34.880 --> 00:28:36.740 of dollars of debt and somehow make it all work 00:28:36.740 --> 00:28:38.759 out in the end? One runs away with your money. 00:28:38.880 --> 00:28:40.859 The other one drives the bus off the cliff with 00:28:40.859 --> 00:28:42.900 you inside thinking you can make it. fly. Exactly. 00:28:43.019 --> 00:28:45.519 And the delusional one is often much, much harder 00:28:45.519 --> 00:28:48.599 to spot because their belief, it feels like passion. 00:28:48.660 --> 00:28:51.579 It feels like commitment until it's way too late. 00:28:51.680 --> 00:28:53.400 That is a terrifying thought to leave you with. 00:28:53.480 --> 00:28:55.619 Check your portfolio, everyone. Make sure your 00:28:55.619 --> 00:28:59.279 CEOs are sane, not just passionate. Indeed. Thank 00:28:59.279 --> 00:29:01.440 you for listening to this deep dive into Adelphia. 00:29:01.559 --> 00:29:04.859 It's a wild ride from $300 to $17 billion and 00:29:04.859 --> 00:29:07.220 back again. It certainly is. We will see you 00:29:07.220 --> 00:29:08.640 on the next deep dive. Stay curious.