Draft

The Failure of Adelphia Communications Corporation

Adelphia Communication Corporation downfall began March 27, 2002; this is when the discovery of the Rigas Family had borrowed $2.3 billion dollars that was reported on the company’s balance sheet. This money was borrowed for the family’s personal use. It was reported that they family used the company’s money to pay for apartments, to build a golf course, to purchase the Buffalo Sabers Hockey team, and to create the Rigas investment firms and subsidized documentary film. During this time period, Adelphia Business Solution Inc. filed for bankruptcy protection and dropped 18% of its stock.
In the month of April, Adelphia delayed in filing its annual reports that would address the question that was raised about the off-the-book debts. The stockholders accused her of misleading them with their financial reports. Adelphia as hires investment banks to explore the ways they can reduce their debt and improve their sales.
During the month of May, Adelphia announces its soliciting bids for cable systems in Los Angeles, Florida, Virginia, and in the Southeast to reduce their debt. Also John Rigas, the founder, decided to step down as chairman, president, and CEO of Adelphia Communications. Erland Kailbourne takes John Rigas place; he was the chairman of Adelphia board’s audit committee. Nasdaq also stopped trading in Adelphia’s stock because they needed more information dealing with Adelphia’s finance. May 2002, CFO Timothy Rigas decided also he would resigned from his position with Adelphia during this month. Kailbourne announces the company has missed $44.7 million dollars in bonds and interest payments. The Rigas family decides to relinquish control of the company and turned over assets to help cover loans. They also released details showing the Rigas family use of the company’s assets for their personal use. The estimated liability was for $3.1 billion dollars in family debts.
During the month of June, Adelphia dismisses Deloitte and Touche as its accountants and starts to look for replacements. On June 21st Adelphia agrees with two banks for $1.5 billion in financing to continue operating while it was reorganizing under the Chapter 11 bankruptcy protection. On the 25th, Adelphia realized they were not going to be able to handle the situation they were in and decide to file for bankruptcy.
In July the Rigas family (John, Timothy, and Michale), James Brown and Michael Mulcahey was arrested by the Federal authorities and charged on the counts of conspiracy.
In November 2002, Adlephia sued their former auditors Deloitte and Touche for “professional negligence, breach of contract, fraud, and other wrongful condut.” On April 2005, Deloitte and Touche agreed to pay a settlement of $50 million dollars to Adelphia Communications Corporation’s for the fiscal year 2000 financial statements.









Adelphia. (2008, April 15). In Wikipedia, The Free Encyclopedia. Retrieved 23:56, April 19, 2008, from http://en.wikipedia.org/w/index.php?title=Adelphia&oldid=205676796

Associated Press 2002. (2008, April 15). Former Adelphia Executives Arrested. FOX News [online]. New York, NY (July 24): Available from World Wide Web: http://www.foxnews.com/story/0,2933,58606,00.html