Adelphia Case Summary

Adelphia had shown nothing but growth and promise at the turn of the 21st century. Investors had seen record growth, expansion, and felt the company was growing into a dominate player within the telecommunications industry. Adelphia continued its push for growth and continued acquiring company after company and by late January, had grown its subscriber base to approximately 5.5 million customers. At this time, the company was heavily in debt after all the acquisitions however, analysts felt favorable on Adelphia as the premier company. This status only held for two months and in March, officials disclosed a previously hidden and concerning balance sheet item disclosing roughly $2.3 billion in unrecorded debt. The debt surprisingly came from co-borrowings between Adelphia and various entities under the Rigas family trust. Terms of the agreement were that the Rigas entities were responsible for the debt but the surprising detail was that if the Rigas Trust could not repay the debt, Adelphia would be held financially liable. As word of this mounting debt surfaced, concerns began to mount about the …show more content…
More and more reports of questionable dealings began to mount as the scandal began to unfold. Questionable practices such as the purchase of office furniture by Adelphia from another Rigas owned company at exorbitant prices. Rigas used funds from Adelphia to build a private golf course along with use of Adelphia resources such as the firm’s company airplane, and hired personal staff and chefs all on Adelphia’s payroll. As if this wasn’t bad enough, the Rigas’s family also manipulated the accounting of the transactions falsely overstating the company’s financial condition. The company’s cash flows along with cable subscribers were grossly overstated leading to additional concerns among investors and regulators