The Adelphia Scandal

The Dawn of Adelphia Adelphia was founded in 1952 by John Rigas and his brother Gus Rigas in Coudersport, Pennsylvania with the purchase of their first cable franchise for $300. After 20 years, the Rigas brothers incorporated their company under the name Adelphia which derived its name from a Greek word which means brothers, an apt corporate title for a business that would employ generations of the Rigas family. Adelphia was a cable television company and built its success on a strong commitment to customer care; and because of this commitment, a glorious growth spree would follow. By 1998, Adelphia passed the two million-customer milestone and served approximately 5.6 million cable television …show more content…
Adelphia repeatedly misstated the key performance measures used by Wall Street analysts to assess the performance of cable companies. The number of subscribers was a performance measure and Adelphia falsely inflated this count by including subscribers from their unconsolidated affiliates (Van Peursem, et al., 2007). And finally, Adelphia's executives concealed rampant self-dealing by the Rigas Family, including the undisclosed use of corporate funds for Rigas Family stock purchases and the acquisition of luxury condominiums in New York and elsewhere . The Rigases, it appeared, had used much of the loan money to acquire Adelphia stock; they had also used loan money to finance the purchases of cable properties separate from Adelphia. As the scandal unfolded the litany of questionable dealings between the Rigas family and Adelphia continued to grow. While the Rigas family used company funds in numerous inappropriate ways, it also manipulated the accounting of the transactions to create a falsely inflated picture of the company's financial condition. And when it was revealed that John, Michael and Timothy Rigas had taken $3.1 billion in unrecorded loans, Adelphia filed for bankruptcy in June of 2002 (Fierce Telecom, 2011). The company filed for Chapter 11 Bankruptcy--a type of reorganization wherein the company continues its daily operations in order to pay