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Corporate Governance: Adelphia Communications fraud case - Essay Example

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This essay discusses that the Adelphia communications top management entirely belonged to the Rigas family and the family as a whole was involved in the widespread and multifaceted scheme to launch a financial fraud against the company’s assets and treasury. …
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Corporate Governance: Adelphia Communications fraud case
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Download file to see previous pages The intention of this study is Adelphia Communications fraud case as one of the most renowned financial frauds ever incurred to a public company.The fraud was categorized into three principal components:
First: The fraud began in mid 1999 to the end of 2001; over $2.3 billion were fraudulently excluded from the company’s annual and quarterly consolidated financial statements and recorded those liabilities in the books of unconsolidated affiliates. The exclusion violated the Generally Accepted Accounting Principles, but the Rigas family misled the public in filings of the commission and other financial statements. The Rigas family created sham transactions and backed them up by making fictitious documents by presenting false appearance that the company actually paid the debts.
Second: During that period, the Rigas family continued to misstate in the press releases about the company earnings and commission filings. Adelphia communication reported company’s performance crucial to the metrics formed by the Wall Street to evaluate Cable Company’s performance.
• The number of cable subscribers
• Extent of plant up gradation and renovation
• Earnings including net income and earnings before interests, taxes and depreciation.
Third: Adelphia management continued mispresentation in the company fillings. The Rigas family misled the company financial statements so as to hide their self dealing. The defendants of the Rigas family intentionally forced the public company to pay for vacation properties and apartments in New York City which were used by the Rigas family and to build a golf course on the land mostly in ownership of the Rigas family.
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The Rigas family misled the company financial statements so as to hide their self dealing. The defendants of the Rigas family intentionally forced the public company to pay for vacation properties and apartments in New York City which were used by the Rigas family and to build a golf course on the land mostly in ownership of the Rigas family. For their own interest, the Rigas family secretly sanctioned a huge capital from the company assets and drew two consecutive financial frauds breaching company economic policies. An amount of $ 772 million and over $ 563 million of Adelphia assets were issued just for the benefit of the Rigas family (sec.gov 2002). Even after the acknowledgement of the existence of the liabilities in the company balance sheets on March 27, 2002 the fraud continued to take place by the Rigas family. The defendants kept covering their misconduct and secretly diverted $ 174 million to personal margin loans of the Rigas family members. The company failed to maintain a stable position in the stock exchange and the price of Adelphia’s stock collapsed to $ 20.39 closing price on March 26, 2002. The situation became more severe when the closing price of Adelphia’s share collapsed to $ 0.79 per share on June 3, 2002. The company stocks were delisted from the National Association of Securities Dealers Automated Quotation System. The defendants of the Rigas family resigned from their offices and director position in mid to late May 2002 (sec.gov 2002). The Securities and Exchange Commission alleged the Adelphia communication management and filed charges against the founding member of the Adelphia Communication Corporation John J. Rigas and his sons Timothy J.Rigas, Michael J.Rigas, and ...Download file to see next pagesRead More
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