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Adelphia Corporate Scandal

In: Business and Management

Submitted By ptown92870
Words 951
Pages 4
Arthur Gharakhanian

Adelphia (A)

ACCU-620

Brandman University

Week 3, Assignment 1

November 7th, 2012

Adelphia
Introduction
Founded in 1952 by John Rigas, Adelphia Communications Corporation was a "family" business. John Rigas (father) was the chairman and CEO, Tim Rigas (son) served on the board and was the CFO, and Michael Rigas (son) was EVP and a board member along with James Rigas (son) (USA Today, 2004). Together they owned the majority of Adelphia's stock and occupied the majority of the seats on the board. These two components would be key in the fraud that would ensue. The personal lives of the Rigas’ would be the root cause of their need for cash and the reason behind the fraud they would commit (USA Today, 2004).
The Scandal The government described it as ''one of the most extensive financial frauds ever to take place at a public company" (Sorkin, 2004). The Rigas' used company money to construct a private golf course, own several private jets, and purchase multiple several luxury homes. They were able to do this by establishing "complicated cash-management systems to spread money around to various family-owned entities and as a cover for stealing about $100 million for themselves" (AP, 2005). In order to keep investment money flowing in, they would manipulate the books to meet analyst expectations, thus inflating the stock price and at times they would mix Adelphia's funds with their own private funds. Upon realizing the amount of funds that had been taken, Tim Rigas "limited" the amount of money his father could take to $1,000,000 per month. One example of the fraud they committed was they disguised Adelphia's actual expenses for digital decoder boxes. In 2001 the company claimed that it sold 525,000 boxes for $101
Adelphia
million to an unaudited Rigas-owned company that has no cable systems (Farrel, 2005). At the end…...

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