Adelphia Case study
Introduction
In 1952, John Rigas founded Adelphia Communications Corporation with a $300 license, took the company public in 1986, and built it up by acquiring other systems in the 1990s. In March 2002 Founder, chairman, and CEO of Adelphia Communications Corporation 78 year old John Rigas, his two sons, and other Adelphia executives were arrested and charged with looting the nation’s sixth largest cable company on a massive scale. Adelphia Communication Corporation whose revenue exceeded $2.9 billion with over five million subscribers and offices in 32 states and Puerto Rico was well on its way to being the largest cable provider in the US (Barlaup, Hanne, & Stuart, 2009).
Adelphia Scandal
In March 2002, Adelphia disclosed that it had backed the Rigas family 2.3 Billion dollars in loans over the years. These loans were shifted to unconsolidated affiliates, and Adelphia used sham transactions and fictitious documents to show the loans had been repaid. Rigas Management also manipulated the books to meet analysts’ expectations and inflated the stock price. The family had withdrawn millions of dollars and misused the corporation’s assets to the point that Adelphia was bankrupt.
The Rigases doctored financial records at Adelphia and created sham transactions and phony companies to inflate the firm 's earnings and to conceal its mounting debts. They were dishonest about the use of corporate funds and assets. They used Adelphia’s line of credit for personal purchases and on many occasions used the corporate jet to fly family and friends on luxurious vacations. On another occasion Mr. Rigas used the company jet to fly two $6000 Christmas trees to his daughter in New York. Several Vacation Homes and luxury apartments in Manhattan, private jets, construction of a world-class 18-hole golf course, majority ownership of the Buffalo Sabres, and $700,000 membership in an exclusive golf club was acquired with company monies.
In the preliminary statement from the SEC, it was
In 1952, John Rigas founded Adelphia Communications Corporation with a $300 license, took the company public in 1986, and built it up by acquiring other systems in the 1990s. In March 2002 Founder, chairman, and CEO of Adelphia Communications Corporation 78 year old John Rigas, his two sons, and other Adelphia executives were arrested and charged with looting the nation’s sixth largest cable company on a massive scale. Adelphia Communication Corporation whose revenue exceeded $2.9 billion with over five million subscribers and offices in 32 states and Puerto Rico was well on its way to being the largest cable provider in the US (Barlaup, Hanne, & Stuart, 2009).
Adelphia Scandal
In March 2002, Adelphia disclosed that it had backed the Rigas family 2.3 Billion dollars in loans over the years. These loans were shifted to unconsolidated affiliates, and Adelphia used sham transactions and fictitious documents to show the loans had been repaid. Rigas Management also manipulated the books to meet analysts’ expectations and inflated the stock price. The family had withdrawn millions of dollars and misused the corporation’s assets to the point that Adelphia was bankrupt.
The Rigases doctored financial records at Adelphia and created sham transactions and phony companies to inflate the firm 's earnings and to conceal its mounting debts. They were dishonest about the use of corporate funds and assets. They used Adelphia’s line of credit for personal purchases and on many occasions used the corporate jet to fly family and friends on luxurious vacations. On another occasion Mr. Rigas used the company jet to fly two $6000 Christmas trees to his daughter in New York. Several Vacation Homes and luxury apartments in Manhattan, private jets, construction of a world-class 18-hole golf course, majority ownership of the Buffalo Sabres, and $700,000 membership in an exclusive golf club was acquired with company monies.
In the preliminary statement from the SEC, it was
References: Barlaup, K., Hanne, I. D., & Stuart, I. (2009). Restoring trust in auditing: Ethical discernment and the Adelphia scandal. Managerial Auditing Journal, 24(2), 183-203. Retrieved on April 17, 2015, from ProQuest. Beauchamp, T.L. (1991). Philosophical Ethics: An Introduction to Moral Philosophy, (2nd ed.). New York: McGraw Hill. Kant, Immanuel. 1785. “First Section: Transition from the Common Rational Knowledge of Morals to the Philosophical”, Groundwork of the Metaphysic of Morals. Retrieved on April 18, 2015 from http://sevenpillarsinstitute.org/morality-101/kantian-duty-based-deontological-ethics Markon, J., & Frank, R. (2002, July 25). Adelphia officials are arrested, charged with ‘massive’ fraud – three in the Rigas family, two other executives held, accused of mass looting. The Wall Street Journal. Retrieved April 17, 2015, from ProQuest. Waller, B.N. (2005). Consider Ethics: Theory, Readings, and Contemporary Issues. New York, NY: Pearson Longman U.S. Securities and Exchange Commission, (2002). SEC Charges Adelphia and Rigas Family with Massive Financial Fraud.