Essay on Adelphia Scandal

2340 Words Dec 30th, 2013 10 Pages
The Adelphia Scandal

The Dawn of Adelphia
Adelphia was founded in 1952 by John Rigas and his brother Gus Rigas in Coudersport, Pennsylvania with the purchase of their first cable franchise for $300. After 20 years, the Rigas brothers incorporated their company under the name Adelphia which derived its name from a Greek word which means brothers, an apt corporate title for a business that would employ generations of the Rigas family.
Adelphia was a cable television company and built its success on a strong commitment to customer care; and because of this commitment, a glorious growth spree would follow. By 1998, Adelphia passed the two million-customer milestone and served approximately 5.6 million cable television
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Cohen was astounded to see the footnote disclosure and pressed Tim Rigas for details at the end of a conference call that day. Things in Coudersport quickly spun out of control as shareholders asked for clarity and transparency. The revelations and the investigation that followed sent the company spiraling deeper and deeper into a scandal that the Securities and Exchange Commission (SEC) eventually called, "one of the most extensive financial frauds ever to take place at a public company" . The stock continued to fall and on May 15, 2002 John Rigas resigned as chairman and CEO.
In the Securities and Exchange Commission v Adelphia Communications Corporation 2002, the SEC charged Adelphia of three specific acts. First, executives fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them in off-balance sheet affiliates. Adelphia management kept this liability off the books by allocating the co-borrowing loans among its unconsolidated subsidiaries. Debt of the subsidiary was increased and Adelphia's bank debt was reduced by the same amount. It gave investors the false impression that the company was leveraging and paying off debts. The company made additional misrepresentations in public statements and filings to keep up this appearance as well as creating bogus transactions and fictitious documents to prove that the…

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