Adelphia Corporate Scandal Essay

937 Words Nov 23rd, 2012 4 Pages
Arthur Gharakhanian

Adelphia (A)


Brandman University

Week 3, Assignment 1

November 7th, 2012

Founded in 1952 by John Rigas, Adelphia Communications Corporation was a "family" business. John Rigas (father) was the chairman and CEO, Tim Rigas (son) served on the board and was the CFO, and Michael Rigas (son) was EVP and a board member along with James Rigas (son) (USA Today, 2004). Together they owned the majority of Adelphia's stock and occupied the majority of the seats on the board. These two components would be key in the fraud that would ensue. The personal lives of the Rigas’ would be the root cause of their need for cash and the reason behind the fraud they would commit (USA Today,
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By the time investors found out, the balance sheet of Adelphia had $2.3 billion in off-balance sheet (personal loans to the Rigas') that the family had deliberately hid. They were able to accomplish all of this by creating phony transactions and fake companies to complete these transactions with. All of this was done in order to inflate the company's earnings and help conceal the massive amounts of debt they were piling onto the company. When Adelphia filed for bankruptcy protection on June 25, 2002, it listed $18.6 billion in debt.
Future Prevention The Sarbanes-Oxley Act been was created as a direct response to the fraud committed, and I believe this act is the right step forward in preventing future scandals. It includes ""the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt" (Buemiller, 2010). The act contains 11 titles that each describe specific requirements for financial reporting. The benefits of these titles are broad based, but equally important. The Sarbanes-Oxley Act created a new Public Company Accounting Oversight Board which oversees all public accounting firms that provide auditing services. It also creates a central oversight board tasked with registering auditors, defining the specific processes and procedures for compliance audits, inspecting and policing conduct and quality control, and enforcing compliance with the specific mandates of SOX. SOX compliance also means

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