NEW YORK -- John Rigas had asked to surrender out of the spotlight, so he and his sons could quietly face criminal charges of pocketing $1-billion (U.S.) from Adelphia Communications Corp., the cable empire that the 78-year-old created and then ran into the ground, costing stockholders $60-billion.
Not a chance.
It's a new, crueller season on Wall Street; a time, as one cable TV show aptly described it, when fallen chief executive officers must go "from cufflinks to handcuffs."
The policemen showed up at the Rigas's plush, Upper East Side apartment at the unusually early hour of 6 a.m. on Wednesday. They introduced themselves to the doorman and, minutes later, slapped handcuffs on the aging billionaire and two of his sons, Michael and Timothy.
The trio -- now dubbed the "Three Little Pigs" by one tabloid -- were stripped of their designer ties and shoelaces and then marched out.
They were forced to run the gauntlet of photographers and TV camera crews, all of whom had been tipped to show up for what New York media are calling Wall Street's "perp walk."
The Rigas's lawyer -- as well as most political and business analysts -- agree the arrests were a well-choreographed public relations campaign by regulators and the White House, to show that President George W. Bush is serious about cleaning up Corporate America.
After all, the exercise was symbolic: All three men were on the street hours later, free to put their ties back on after dishing out the required $10-million apiece for bail.
"It's pretty tough to arrest a 78-year-old man at 6 o'clock in the morning when he's offered to surrender," noted Rigas family lawyer Peter Fleming, alluding to the photo-op that was created.
The Rigas clan won't be alone in having to do the "perp walk," though.
Similar dramas, say experts, are going to be repeated many times in the months ahead, as regulators try to show average investors they will pursue some of the disgraced CEOs who were once virtual lords on Wall Street before their companies melted down.
"The [U.S. Securities and Exchange Commission] is certainly geared up now to pounce," said Thomas Mann, a senior fellow at the Washington-based Brookings Institution. "Since most Americans believe the bad guys should be put away, it is desirable for these prosecutions and arrests to be highly visible."
There is clearly an element of political theatre to the white-collar arrests, he said.
With trillions of dollars in investor wealth sucked out of the stock market in the past few months, mostly as the result of a spate of boardroom accounting scandals from Enron Corp. and WorldCom Inc. to, most recently, AOL Time Warner Inc., which saw its stock plunge 15 per cent yesterday, investors are in a murderous mood. And that has made cleaning up Wall Street one of the crucial issues for U.S. politicians, now girding for November's federal congressional elections, in which the balance of power could change in the House of Representatives.
"The Republicans are terrified," Mr. Mann said.
Chief among those Republicans concerned is Mr. Bush, who has been promising to punish corporate "evil-doers" but has been wounded by the growing sense that his administration is too cozy with business, Mr. Mann added.
The White House's woes are now common, water cooler gossip: Mr. Bush's appointee to the SEC, Harvey Pitt, was discovered to be meeting with companies under investigation; Vice-President Dick Cheney is under a cloud over an SEC investigation of Halliburton Co., the oil company he headed before entering the White House. And there are renewed suspicions about Mr. Bush's own stock dealings in 1990, an $800,000 sale just before the company declared steep losses.
For those reasons, it makes for good politics to trot out CEOs when they are arrested, Mr. Mann said, adding that more arrests are likely soon.
"Everyone is waiting for the next shoe to drop," he said.
That might include executives at telecom giant WorldCom, particularly Edmonton-born Bernard Ebbers, who was forced out as CEO in April. The Wall Street Journal reported yesterday that Mr. Ebbers could be indicted over the $3.85-billion accounting scandal at the company, which forced WorldCom to make a $107-billion Chapter 11 filing for bankruptcy protection this week, the largest in history.
The real test of how tough regulators will be, though, may be the fate of Martha Stewart. The self-appointed arbiter of middle-class taste for America, she is now facing scrutiny over selling $225,000 worth of ImClone Systems Inc. shares, a day before they plummeted in price. She is a friend of ImClone CEO Samuel Waksal, who was also displayed for the media when arrested last month on insider trading charges.
How investigators treat Ms. Stewart, should she be indicted, could be a test, Mr. Mann said, of how deep the purge will be. "Then we'll know how hardball they really want to play."
© The Globe and Mail
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