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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 afford to buy back more than a billion dollars of the company's stock. Caught by surprise, CFO Tim couldn't come up with a decent response. Adelphia Communications Corp. founder John Rigas and his son Timothy were sentenced of conspiracy, bank fraud and securities fraud for looting the cable company and cheating its investors.The two were convicted of all 15 securities fraud charges against them and other counts. The Rigases and Mulcahey were charged with hiding $2.3 billion in debt at the cable company, deceiving investors and stealing company cash to line their own pockets. The complaint also claims that the Rigases used the company's three corporate jets for personal use that was neither authorized by the company's board nor paid for by the family. In the charge, in August of 2000, Timothy Rigas and his friends used an Adelphia jet to fly to Africa for a safari. Timothy Rigas prevented Adelphia employees from keeping records of family's air travel and the company's board never approved family used of the planes, the complaint said. The company also paid for two apartments in Manhattan, one used rent-free by John's daughter and son-in-law, according to the complaint (Markon). Authorities reported the investigation as a joint effort by the Postal Inspection Service, the SEC and the U.S. attorney in New York. The separate SEC case names each of the defendants in the criminal case, as well as a third brother, James P. Rigas. His attorney did not make calls seeking comment. The SEC case names the company itself in an alleged securities fraud to exclude billions of dollars in contracts from its financial statements by hiding them in off-balance-sheet affiliates; forge earnings to meet Wall Street's expectations; and conceal "rampant self-dealing by the Rigas family, including the undisclosed use of corporate funds" for stock purchases and to buy luxury New York condominiums. The SEC was also seeking civil penalties and permanent injunctions barring defendants from ever again acting as officers or directors of a public company. The Rigases also created a special accounting system to conceal their personal transactions, the complaint asserted using the company's centralized cash management system, which merged cash from Adelphia and Rigas private businesses, for their personal use. According to the complaint, The company also misrepresented its financial results. Timothy Rigas discovered that Adelphia's earnings before interest; taxes depreciation and amortization were below their public forecasts and instructed Adelphia employees to create fictitious transactions to boost Adelphia's revenue in October 2000. (Markon) The scandal came to light when the Rigases published that Adelphia was responsible for more than $2 billion in loans to family-owned entities. Outside board members took control and formed a special committee to investigate. The SEC launched a formal probe three and a half months ago and two grand juries, one in New York, and one in Pennsylvania began investigating. Adelphia also filed the lawsuit seeking more than $1 billion against the entire Rigas family, including John's wife, Doris, and his daughter Ellen and son-in-law, Peter Venetis. The lawsuit accuses the family of a violation of the Racketeer Influenced and Corrupt Organizations Act, breaching its fiduciary duties, wasting corporate assets, abusing control, breaching its contracts and other violations. The suit alleges that the Rigases "regularly conducted their business activities with the sole purpose of benefiting themselves at the expense of Adelphia" and borrowed company funds that "either directly or indirectly, unjustly enriched the Rigas family directors and other Rigas family members." The criminal complaint, filed in federal court in New York, offers the clearest view yet of one of the biggest cases of alleged insider dealing ever. In its lawsuit, filed in federal court in Manhattan, the Commission alleges that the defendants violated the antifraud, periodic reporting, record keeping, and internal controls provisions of the federal securities laws. The Commission seeks a judgment ordering the defendants to account for and disgorge all ill-gotten gains, including all benefit received by the individual defendants during the fraud, all property illegally taken from Adelphia by the individual defendants through undisclosed related-party transactions, and any split payments related to the individual defendants' resignations from the company. The Commission also seeks civil penalties from each defendant, and permanent orders against violating the securities laws. The Commission further seeks an order prohibiting each of the individual defendants from acting as an officer or director of a public company. "This case presents a deeply troubling picture of greed and deception at a large, publicly-held company," said SEC Director of Enforcement Stephen M. Cutler. "

Works Cited
"Adelphia Founder John Rigas Found Guilty." Msnbc.com. 8 July 2004. Web. 20 July 2015. .
Markon, Jerry. "Adelphia Officials Are Arrested, Charged With 'Massive' Fraud." WSJ. 25 July 2002. Web. 20 July 2015. .
"SEC Charges Adelphia and Rigas Family With Massive Financial Fraud." SEC Charges Adelphia and Rigas Family With Massive Financial Fraud. 24 July 2012. Web. 20 July 2015.
"Securities and Exchange Commission." Adelphia Communications Corporation, John J. Rigas, Timothy J. Rigas, Michael J. Rigas, James P. Rigas, James R. Brown, and Michael C. Mulcahey: Lit. Rel. No. 17627 / July 24, 2002. Web. 20 July 2015. .
Tobak, Steve. "The End of the Adelphia Saga - CNET." CNET. 23 Aug. 2008. Web. 20 July 2015. .