Adelphia Communication

In: Business and Management

Submitted By docjohn6969
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Synopsis of Adelphia Communication
Issue in the Scenario that is facing the company Adelphia Communications was a publicly held company owned mostly by the founder John Rigas and his family. Adelphia had a board of directors the consisted of nine people, five of them appointed by the Rigas. Over a five year period of time the Rigas family “loaned” $3.1 billion dollars from Adelphia. This was $800 million more than what was initially reported during an SEC investigation (Patsuris, 2002). These “loans” financed everything from real estate ventures, airplanes, country club memberships, and operating the Buffalo Sabres hockey team. The Board of Directors fired the auditor of the company, Deloitte & Touche, when they began to question some inconsistencies found during an audit (Farrell, 2002). Ironically, Adelphia sued Deloitte & Touche for incompetence. If Adelphia’s board of directors had been independent, the board would have had to rely on reports from management, external auditors and consultants, in order to determine the company’s status. Unfortunately, Adelphia’s board was so packed with insiders it was hardly in this position.
Company response to the issue Soon after the termination of Deloitte, PriceWaterhouseCoopers was selected as the new auditor for Adelphia. The first step for PWC was to re-audit previous year’s financial statements. Two weeks after the hiring of PWC, Adelphia filed for Chapter 11 Bankruptcy protection and was able to secure $1.5 billion in debt to continue operating. The company hired a new board of directors. To fill these positions the firm went outside the Adelphia umbrella and searched for ethical industry veterans to become board members. John Rigas was sentenced to 12 years in prison and his sons were sentenced to 17 years.
Outcomes from the company’s response Adelphia Communications was never able to…...

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