...TOP CORPORATE SCANDALS WorldCom The U.S.’s second-largest long-distance phone company at the time, WorldCom/MCI filed the largest Chapter 11 bankruptcy in American history in July 2002. The company used fraudulent accounting methods, namely underreporting expenses and inflating revenues with bogus accounting entries, to hide its declining financial condition between 1999 and 2002. An internal audit uncovered approximately $3.8 billion in fraud in June 2002, and in 2003, it was estimated that the company's total assets had been inflated by around $11 billion. Verizon Communications purchased the enterprise in January of 2006 and renamed it the Verizon Business division. Qwest Communications International Inc. The company was also involved in accounting scandals, and was fined $250 million by the U.S. Securities and Exchange Commission (SEC), to be split into two $125 million payments due to the poor state of Qwest's current financial health. Among the transactions in question were a series of deals from 1999 to 2001 with Enron's broadband division which may have helped Enron conceal losses. In 2005, former Chairman and chief executive officer (CEO) Joseph Nacchio, former President and chief operating officer (COO) Afshin Mohebbi and seven other former Qwest employees were accused of fraud in a civil lawsuit filed by the SEC. Separately, Nacchio was convicted of 19 counts of insider trading in Qwest stock on April 19, 2007. On March 31, 2011 US Federal Judge Marcia Krieger issued...
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...out’ principle also prevails in financial markets, public trust in the functioning of financial markets has declined as a result of major financial reporting scandals involving Enron, Tyco, WorldCom, Parmalat and others. Also, massive overvaluations of equity that occurred in the second half of the 1990s and in the early 2000s have been singled out as being caused by misinformation and manipulation of financial results ( Jensen, 2002). More generally, when information about the operation of public companies is false, misleading or opaque, trust in financial markets is likely to be affected adversely. This gives financial market participants a stake in the disclosure of timely and meaningful information, including by assuring that the quality of financial reporting by public companies is as high as possible. And this in turn puts the spotlight on the role of the gatekeepers of the public trust, in particular accounting firms, banks, rating agencies, supervisors and regulators. This contribution addresses the key questions of why public trust is in decline, why agency relations have broken down within companies and within gatekeepers, and how trust in financial markets can best be restored. It will be argued that, in answering these questions, it will be necessary to go beyond recent corporate scandals. Gatekeepers of the public trust play a central role in modern, complex...
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...Course AC557:01: Internal Control Assessment and Design Unit 5 Final Project: Adelphia Introduction This case analysis is about the Adelphia Corporation fraud that was considered to be one of the massive corporate scandals in US history. This company did not receive as much television and news exposure as Enron and WorldCom, but the fraud the Rigas family had engaged in caused the company to sustain tremendous losses. Adelphia was considered a family owned business to the Rigas family members. John Rigas had dominant control over the company and used his power in the company to engage in fraudulent activity to maintain the extravagant lifestyle they were used to living. Their unethical behavior bilked the company out of more than $100 million dollars, they also hid $2 billion of debt the family had accumulated in off-balance sheet partnerships, and lied to the public and investors about Adelphia’s operation and financial condition. The lack of virtually no internal controls or corporate governance in the company allowed the family members to participate in internal corruption, fraudulent activity, unethical behavior which caused the company to file bankruptcy. Adelphia History John Rigas and his brother Gus Rigas started the first cable system in 1952 in Coudersport, Pennsylvania. The name they chose for the company was Adelphia since it is a Greek word that means “brothers”, and generations of the Rigas family would be hired as employees of the company (International...
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...The story of the Adelphia Scandal begins in 1952 with purchase of a cable network company by John Rigas. By the year 1972, the purchased cable network had evolved into Adelphia Communications Corporation. By the late 1990s, Adelphia had acquired Century Communications and eventually became the sixth largest cable company, servicing over 5 million subscribers. Adelphia was a family owned and operated business. Rigas family members were the majority of Adelphia’s board members and controlled a majority of the organizations voting stock. John Rigas held the position of Founder and Chairman, his three sons held key management positions such as, Chief Financial Officer and Executive Vice Presidents. Like several other businesses owned and managed by family members, Adelphia feel victim to poor ethical decision-making, managerial deception, and social irresponsibility. John Rigas was well known for his extremely lavish lifestyle. The Rigas family indulged in things such as several luxury properties, private jets, leisure construction projects, and even majority ownership of a professional league hockey team. The extravagant life style enjoyed by the Rigas family was primarily funded by Adelphia Communication Corporation. Unknown to stockholders and nonfamily related board members, Adelphia had financed over $2 billion in loans to the Rigas family. The Rigas family had started several private business ventures using Adelphia as a partnership , which resulted in the Rigas family...
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...Accounting Ethics 2 1. Given the corporate ethical breaches in recent times, assess whether or not you believe that the current business and regulatory environment is more conducive to ethical behavior. The ethical breaches in recent times, Weygandt, Kimel, Kieso( 2012) researched that “financial press open full articles and documents facts about financial scandals at Enron, WorldCom, HealthSouth, AIG, Adelphia Communication and Cable and more. As the scandal came to light people did not play the stock market if they believe that the stock prices were rigged.” Weygandt, Kimel, Kieso (2012) researched that; “the United States government regulators and lawmakers were very concerned that the economy would suffers if investors lost confidence in corporate accounting because of unethical financial reporting. In response, Congress passed the Sarbanes-Oxley it is intent is to reduce unethical corporate behavior and decrease the likelihood of future corporate scandals. As a result of SOX, top management must now certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. SOX increased the independence of the outside auditors who review the accuracy of corporate financial statements and increased the oversights role of boards of directors. The effective financial reporting depends on sound ethical behavior...
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...7/1/2015 Adelphia founder sentenced to 15 years in jail Business Corporate scandals | NBC News Adelphia founder gets 15year term; son gets 20 Recommend Tweet 0 0 0 Below: Discuss Data Related 108 Rigases were convicted of stealing $100 million in company funds updated 6/20/2005 7:04:56 PM ET NEW YORK — John Rigas, who turned a $300 investment a half century ago into cable behemoth Adelphia Communications Corp., was sentenced to 15 years in prison Monday for his role in the looting and debthiding scandal that pummeled the company into bankruptcy. Rigas’ son Timothy, 49, who like his father was convicted last year of bank fraud, securities fraud and conspiracy, was sentenced to 20 years in prison. Sand could have sentenced both men to life. The sentences are among the harshest handed down in any U.S. court since the fall of Enron in 2001 touched off a rash of corporate scandals that rocked the markets and have cost investors billions of dollars. Raising the possibility that the frail, 80yearold Rigas could die behind bars, U.S. District Judge Leonard Sand said the sentence might be cut Former Adelphia Communications CEO John Rigas, 80, enters Manhattan federal court for his sentencing M stealing millions of dollars from the cable company and deceiving investors by hiding its crushing debt. short if Rigas serves at least two years and prison doctors believe he has less than three months to live. “This is a tragedy lacking in heroes...
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...Adelphia Communications scandal By Insert name Insert institution Adelphia Communications scandal Introduction Adelphia Communications Company was a television cable company whose headquarters centered in Coudersport, Pennsylvania. It ranked as the fifth most prestigious cable companies in United States. John Rigas is the founder of the company. The company was highly respected until an infamous scandal ensued following claims of bankrupt in 2002, at which time its headquarters relocated to greenwood Village, Colorado. According to Jefferson (2007), after the ensuing controversial legal proceedings ended, the company’s assets were liquefied. Time Warner Cable acquired most of the company’s assets in 2006. LFC auctioned the rest of the assets. Pioneer Telephone bought the existing Adelphia Communications Corporation’s telephone business skeleton, which had over 110,000 registered customers across 27 states in United States of America. The scandal The scandal is about carefully concealed fraudulent activities involving the company and the Rigas family, the founder. Adelphia Communications corporate made an agreement with the Rigas family that placed the two parties as guarantors of each other. Investigations following the file for bankruptcy uncovered shocking revelations of the operations involving the two parties: the company and Rigas family. Apparently, Rigas family borrowed heavily from the company for their own personal gain, leading to a deficit of billions of...
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...Adelphia Communications scandal Matthew Tassin Trident University Ethics 501 Introduction Adelphia Communications Company was a television cable company whose headquarters centered in Coudersport, Pennsylvania. It ranked as the fifth most prestigious cable companies in United States. John Rigas is the founder of the company. The company was highly respected until an infamous scandal ensued following claims of bankrupt in 2002, at which time its headquarters relocated to greenwood Village, Colorado. According to Jefferson (2007), after the ensuing controversial legal proceedings ended, the company’s assets were liquefied. Time Warner Cable acquired most of the company’s assets in 2006. LFC auctioned the rest of the assets. Pioneer Telephone bought the existing Adelphia Communications Corporation’s telephone business skeleton, which had over 110,000 registered customers across 27 states in United States of America. The scandal The scandal is about carefully concealed fraudulent activities involving the company and the Rigas family, the founder. Adelphia Communications corporate made an agreement with the Rigas family that placed the two parties as guarantors of each other. Investigations following the file for bankruptcy uncovered shocking revelations of the operations involving the two parties: the company and Rigas family. Apparently, Rigas family borrowed heavily from the company for their own personal gain, leading to a deficit of billions of dollars in the company’s...
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...Adelphia Communications: A Family’s Power It started as a striving business dedicated to providing cable service to the public. What became of Adelphia Communications would be just another example of the vicious act known as fraud. Fraud is the intentional act of misleading others about financial information for profit, personal gain, or other dishonest advantage. As the new millennium dawned 14 years ago, we saw an unraveling of numerous fraudulent activities by organizations large and small. One of these organizations that became perpetrators of fraud was Adelphia Communications. During its existence, Adelphia Communications quickly became one of the largest cable companies in the U.S. Adelphia was unique and differed from several other successful corporations at the time, for one special reason: it was family generated. In fact, it became a quintessential example of how a family owned business can grow into a successful publicly traded business. However, the firm family which gave Adelphia Communications its tremendous success, quickly became the cause for its torrential downfall. John and his brother Gus Rigas founded Adelphia Communications in 1972 through the purchase of their first cable company Adelphia Cablevision Inc. in 1952 for $300. In Greek terms, “Adelphia” means brothers; clearly, John and Gus had long-term visions of their company being a family generated organization. Being the founders, the brothers seemed convinced to conduct the business how they wished...
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...Accounting May 22, 2013 Table of Contents 1.0 Corporate ethical breaches in recent times. 3 2.0 Accounting ethical breaches and their impacts 3 2.1 The Scandal of Enron 3 3.0 Organizational ethical issues and the management failure 5 4.0 Breach of the accounting practices and its impacts 5 5.0 Recommendations by the CFO 6 6.0 References 8 1.0 Corporate ethical breaches in recent times. Ethics is an important aspect of business in today’s enironment. Sometimes management ignores or leaves to state laws to govern the code of ethics within a company. Companies have faced a lot of issues regarding ethical situations in modern times. According to Baker (2012) contrary to the popular belief of the recent global financial crisis resulting from failures of accounting ethics, he argues that there is not enough evidence to support this connection. 2.0 Accounting ethical breaches and its impacts Breaches of the accounting ethical policies have become a source of concern for the firms today. The proper application of IFRS and GAAP standards is vital for each firm. In recent years as more scandals have come into the spotlight firms have taken more and more internal measures in addition to the policy making at the governmental level to ensure breach of consumers’ trust and laws does not take place in the future. There has been a tremendous increase in the interest in accounting ethics (Cowton, 2013). 2.1 The Scandal of Enron The scandal of Enron in 1990’s is well known in history...
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...Running head: Adelphia Communications Scandal TUI UNIVERSITY Errol Hammonds Case #1 ETH 501 Business Ethics and Deontology Dr. Bonnie Adams 21 October 2013 Adelphia Communications Scandal Adelphia – which means “brothers’ in Greek – used to be one of America’s largest cable companies. John Rigas [http://en.wikipedia.org/wiki/John_Rigas] founded the company and served as CEO and chairman. His son Tim had the position of Chief Financial Officer and two other sons were VPs. John Rigas also has a son-in-law Peter Venetis who was also a board member. Of the board’s nine seats, the Rigas family held five of them. They also owned the majority of class B super voting shares that gave the family majority voting rights. It is how the family maintained control even after the company went public. In the summer of 2002, three members of the Rigas family were arrested and charged with looting the nation's sixth-largest cable-television company. The Securities and Exchange Commission filed a complaint against the company accusing it of fraud. The charges marked the latest effort by the federal government to crack down on corporate malfeasance as public confidence and the financial markets have been battered by seemingly relentless disclosures of financial shenanigans. The scandal was discovered when the Rigases disclosed that Adelphia was responsible for more than $2 billion in loans to family-owned entities. Outside board members took control and...
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...Firstname Lastname Instructor’s Name Course Number 20 July 2015 Adelphia Communications Adelphia is the 6th biggest cable television provider in the United States and, with various subsidiaries, gives services of cable television and local telephone service to customers in 32 states and Puerto Rico. Adelphia means "brothers" in Greek. It used to be one of America's largest cable companies. John Rigas established the company and served as CEO and chairman. John's son Tim was CFO, and Tim's brothers, Michael, and James were Vice Presidents. All four were council members, along with John's son-in-law Peter Venetis. The Rigases also had 100% possession of class B super-voting shares, which granted the family majority voting rights. That's how they maintained and controlled the board even after the company went unrestricted. Voting configuration was dysfunctional. That alone triggered big red flags for institutional investors. But nobody paid attention to red flags. (Tobak) The complete lack of independent oversight gave the family carte blanche to cheat the company blind. They used company funds to buy back Adelphia stock and reserve other family enterprises, including a golf course, vacation homes, apartments on the upper east side of Manhattan, corporate jets, a fleet of cars, production of a film by John's daughter, and even ownership of the Buffalo Sabres hockey team. On an earnings conference call, Merrill Lynch analyst Oren Cohen wanted to know how the family could...
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...Adelphia Scandal Andrew Hurt RES/351 – Business Research John Gilpin 1/20/14 In July of 2004, John and Timothy Rigas (father and son) had been found guilty by a federal jury on two counts of bank fraud, as well as 15 counts of security fraud. John Rigas was the founder of Adelphia communications, and his son Timothy was the chief financial officer. The two of them were found guilty on conspiracy to steal millions of dollars from the company. At one point the Adelphia was founded in 1952 by both John Rigas and his sibling Gus for a mere $300. Adelphia is the Greek word meaning brothers. In 1986 the company is consolidated with other cable properties and the company is then taken public. In 1989 Adelphia Media Services is created to aid in advertising on different fronts. Adelphia Cable Corporation was the largest cable television provider in the nation before it disappeared. Adelphia also had the nice façade of social responsibility by providing educational institutions with cable services at no charge, sponsoring sporting and cultural events, and supporting charities that needed assistance. John and Timothy had very different motives though. In 1991 Adelphia Business Solutions is launched to provide various communications within the business community such as long distance telephone service, high-speed internet, and even voice messaging. In 1994 Adelphia was experiencing rapid acquisition, and by 1998 had over 2 million subscribers for its customer base. John Rigas had...
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...of time. It can start with anyone stealing a few dollars taken here and there and then it can evolve into intricate plans which can defraud the companies millions, even billions of dollars. This is something that happened with the Adelphia Communications Corp. in the early 2000's. John Rigas, founder and former CEO of Adelphia, and his two sons, Timothy and Michael Rigas, along with the former assistant treasurer, Michael Mulcahey, were all arrested for defrauding Adelphia out of millions of dollars. All four of the defendants were charged with conspiracy, bank, securities and wire fraud. Only John Rigas and his and his son Timothy were actually found guilty on 18 out of the 23 charges filed against them and were facing sentences up to 30 years in jail. Michael Rigas was found not guilty on six of the charges, but the jury was undecided on the other 17. As for Mulcahey, he was found not guilty on all 23 charges (Adelphia Founder). "John Rigas is serving 15 years in a federal prison, while his son Timothy is serving a 20 year sentence" (John). Adelphia all started in "1951 when John Rigas paid $72,000 for a movie theater that was no longer being used in Coudersport, Pennsylvania. The next year he spent $300 for a local cable franchise" (Adelphia Timeline). That's all it took for him to start up a company that little did he know at the time that it would become a multi-million dollar corporation. His brother, Gus Rigas, ended up joining in on the franchise in 1954. Once Rigas...
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...ALBERT MAINGI MUSYOKA D61/63378/2010 DAC: 606 ADVANCED ACCOUNTING SEMINAR A TERM PAPER PRESENTED FOR THE PARTIAL FULFILMENT OF THE MASTER OF BUSINESS ADMINISTRATION UNIVERSITY OF NAIROBI JANUARY – APRIL 2012 Contents SUMMARY OF TERMS 3 ABSTRACT 4 STATEMENT OF THE PROBLEM 5 LITERATURE REVIEW 6 a. Introduction 6 b. The Need for an Audit 7 c. Risk of fraud 8 d. The Auditor-Investor ''Expectation Gap'' 9 e. Auditing Profession and Challenges 9 f. Public opinion 10 g. Family or Personal Relationship 10 h. Integrity 11 i. Inherent limitations of an audit. 11 j. Responsibility of Auditors to Third Parties – Case Law 12 k. International, Assurance Auditing, Standards Board (IAASB) 14 CORPORATE FRAUD CASES 16 CASE STUDY: 21 CONCLUSIONS………………………………………………………………………………24 REFERENCES……………………………………………………………………………..….25 SUMMARY OF TERMS ISA: International standards of Audit KPC: Kenya Pipeline Company IAASB: International Assurance Audit Board IFAC: International Federation of Accounting USD: United States Dollar KCB: Kenya Commercial Bank BCCI: Bank of Credit International SEC: Securities and Exchange Commission ABSTRACT The way in which auditors perform their duties and the auditing profession in general raises questions and puts the auditors on the spotlight from clients who rely on their reports. Questions on whether the public trust the way auditors perform their secondary duty of detecting errors and frauds, the reliability, completeness and...
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