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A

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by

ni zhan

on 20 September 2012

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Transcript of A

Adelphia Adelphia Communications Corporation Rigas Family Entities Cash Management System Share price plummet What Happened after Fraud Deloitte & Touche Auditor pay a huge compensation Background $50 Million to Settle in 2005 $1.6 billion debt excluded Why did they have to pay? $220 million to investors in 2006 related party transactions not disclosed $375 million stockholders' equity overstated 3. Failed to Object to Adelphia’s Netting of Related Party Payables and Receivables Deloitte’s misconduct 1. Identified risk but fail to address 2. Known or should know the misstatements of debt Sarbanes–Oxley Act Fraudulent Behavior Use of Company Assets by Rigas Family Exclusion of $2.3 Billion of Long-term Debt 2)Issued common stocks Exclusion of $2.3 Billion of Long-term Debt 1)Created non-existed management fees 3) Forged sales of digital converters How? 1) Cash XX I Created non-existed management fees Long-Term Debt XX 2) Intercompany Receivables XX Management Fees Revenues XX 3) Long-Term Debt XX Intercompany Payables XX Moved approximately $500 million of long-term debt off Adelphia’s balance sheet. 4) Long-Term Debt XX Intercompany Payables XX 5) Intercompany Receivables XX Common Stock, A or B XX Overstated its stockholders’ equity by over $1 billion Removed over $1 billion of long-term debt from balance sheet 6) Long-Term Debt XX III. Forged sale of digital converters Property and Equipment XX Transferred over $100 million of long-term debt off its
balance sheet even though the non-cable RFE did not purchase the converters. Inflate EBITDA through two major activities: Reported Performance----Financial misrepresentations 1) Fee transactions with RFEs (Rigas Family Entities) 2) Market support transaction with cable box manufacturers EBITDA artificially inflated $400 million through journal entries similar to the following: Fee transaction with RFEs Receivables from RFEs XX Management Fees Revenue XX Assets and EBITDA inflated by the market support revenues through journal entries similar to the following: Market support transaction with cable box manufacturers Property and Equipment x x Market Support Revenue x x The SEC charged that Adelphia misrepresented several statistics that investors may find relevant in evaluating cable companies, including : Reported Performance----Operating statistics misrepresentations 1) its basic cable subscribers,
2) high-speed internet subscribers, and
3) progress in rebuilding its cable systems Including in basic cable subscribers statistics some subscribers who were not basic cable subscribers Basic cable subscribers For example: 33,000 Adelphia internet service
customers who did not subscribe to cable services Including approximately 10,000 subscribers to high- speed internet services provided by Cable RFEs not owned by Adelphia High-speed internet subscribers Rebuilding of cable systems Overstating its two-way-capable systems and understating its expenditures in cable systems assets 1) Undisclosed payments to the Rigas family
2) Undisclosed payments of margin calls
3) Rigas Family Use of Adelphia Plane
4) Golf course owned by Rigas family Use Adelphia’s assets Accounts Receivable-Rigas XX 1999-2002
Adelphia Rigas family Cash XX Board of directors,
outsider directors,
the public 1999-2002
Pledge class A common stock as security for class B common stock $40 $6 margin call : $252 additional securities lender could sell A Accounts Receivable-Rigas XX

Cash XX 1999-2002 Adelphia Plane Personal Travel for Free Reimbursement Adelphia Golf course Rigas family 2001-2002 $13 million Fraudulent Behaviors Bank Adelphia Cash Adelphia RFE "Management Fee"
No cash Adelphia RFE Debt $ 52 million $20.39
March 26, the day before disclosure of 2.3 billion debt $0.79
June 3, 2002,
when the NASDAQ delisted the stock Unmodified opinion when the financial statement are materially missated $6000 price of A dropped Board of directors,
outsider directors,
the public Board of directors,
outsider directors,
the public Board of directors,
outsider directors,
the public Fake reported performance Rigas family paid their price John Rigas - 15 years
Timothy Rigas - 20 years July, 2002, NY John Rigas (CEO)

Timothy Rigas (CFO) The Rigas Family Michael Rigas
(Executive VP)

James Rigas
(Eexecutive VP) 1952

Pennsylvania, U.S.

Fifth largest cable company Hilton Head Communications Coudersport Television Cable Company Highland Video Associates Highland Holdings HIghland 2000 II Issued common Stock Adelphia's
Cash Account Own
cash account (RFEs)
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