Adelphia Communications Scandal

Essay Instructions:

READ For Instruction Required Reading: Please begin by reading the following two journal articles: - Barlaup, K., Hanne, I. D., & Stuart, I. (2009). Restoring trust in auditing: Ethical discernment and the Adelphia scandal.Managerial Auditing Journal, 24(2), 183-203. Retrieved on November 19, 2012 from ProQuest. - Markon, J., & Frank, R. (2002, July 25). Adelphia officials are arrested, charged with ‘massive' fraud – three in the Rigas family, two other executives held, accused of mass looting. The Wall Street Journal. Retrieved November 19, 2012 from ProQuest. Assignment: Using the two articles in the Required Reading section above and the readings provided in the Background page of Module 1, please write a 5-6 page paper in which you address the following: Drawing upon deontological ethics, discuss how Adelphia Communications' executives violated the trust of the company's shareholders and the trust of that of the larger public. Keys to the Assignment: The key aspects of this assignment that should be covered in your paper include the following: - Briefly describe the Adelphia Communications scandal. - Identify and discuss two key ethical problems raised by the Adelphia Communications case. - Describe what is meant by “deontological ethics” generally (e.g., duty and rights), and by Immanuel Kant's Categorical Imperative more specifically. - Apply the deontological framework of business ethics to the two key ethical problems you identified above. - Apply Kant's Categorical Imperative to the two key ethical problems you identified above. Assignment Expectations: Your paper will be evaluated on the following seven criteria: - Precision - Does the paper address the question(s) or task(s)? - Breadth - Is the full breadth of the subject (i.e., the Keys to the Assignment) addressed? - Depth - Does the paper address the topic in sufficient depth and include the background reading and other background resources as references? - Critical thinking - Is the subject thought about critically (i.e., accurately, logically, relevantly, and precisely?). - Clarity - Is the writing clear and are the concepts articulated properly? Are paraphrasing and synthesis of concepts the primary means of responding to the questions or are points conveyed through excessive use of quotations? - Organization - Is the paper well written? Are the grammar, spelling, and vocabulary appropriate for graduate-level work? Are headings included in all papers longer than two pages? - Referencing (citations and references) - Does the paper include citations and quotation marks where appropriate? Are the references from the background reading and assignment present and properly cited? Are all the references listed in the bibliography present and referred to via citation? While you do need to include any references you use in your paper, do not be concerned about use of proper APA citation (as we will cover use of APA style in Module 2). Tips and Suggestions: 1) In writing up your Case, be sure that you use the TUI Well-Written Paper guidelines. 2) Please note that the 5-6 page minimum length requirement does not include your cover page and references. 3) Be sure that you cite all of the sources you use in your paper, and that have been taken from the Background section Module 1 and/or any other external references. As it relates to the Module 1 Case, however, please do not be overly concerned as it relates to use of proper APA referencing -- we will be learning use of APA Style in the next module.

Essay Sample Content Preview:

Adelphia Communications Scandal
Name:
Institution:
Introduction
The Adelphia Corporation, a cable company, was founded as a family business and later incorporated in the year 1972 by the two brothers, that is, Gus Rigas and John. Later in the year 1983, Rigas sold off his portion of the company, and it followed that the company was reincorporated to form a holding company between five other television cable companies in 1994 (Markon & Frank, 2002). The holding company then increased their subscription to the public two fold, as they now expanded at the national level (Stanford Encyclopaedia of Philosophy, 2004). Later on in 2001, the company suffered some financial hiccups due to the declining economy in the country at the time, forcing the management to lay off more than 8% of their staff. In a bid to revive the company, the management decided to venture into the telecommunication arena in 2002, and in 2006 it even sold off some of its cable subsidiaries to raise more funds.
The Scandal
According to the Securities and Exchange commission, from the year 1998, the company had been excluding the billions of dollars that it was in debt, by hiding them in the affiliates off-balance sheets, as such they did not appear on the consolidated statements. To meet the expectation at Wall Street, the company not only inflated their earnings, included false operational statistics but also managed to conceal the self dealing that was carried out by John and his Son. As much as the company was publicly listed the Rigas family still operated the said company as a family business and concealed all the evidence from the shareholders and the public in general (Villanova University, n.d.). The company had a cash management system that gave the family the right loop hole to embezzle the funds. Some of the money co-borrowed, was used by the family to buy shares in the company. The trend was not discovered until later in the year 2002, one of the company’s subsidiaries (The Adelphia Business Solution) filed for the Chapter 11 Bankruptcy Protection as it would not be in a position to pay up its creditors. Under pressure from the investors, Timothy Rigas, the then CFO, assured them that Adelphia would pay up $67.5 million dollars to finance the debt, with an assurance of the same amount contributed from the Rigas family, to save Adelphia B.S. however the share holders were not keen on the Adelphia Debt woes, but wanted to know how more than $2.3 billion dollars debt, that did not feature on the financial statements would be paid up.
Whereas the balance sheets seemed legit, the investors became sceptical about the off balance sheets debts, as most of them were related to subsidiaries that were close to the Rigas family. The SEC finally opened investigations owing to the fact that the Adelphia company had announced that it would delay the release of the annual report. At the same time the stakeholders were also pressuring the company to sell off some of the subsidiaries to pay off the debt (Markon & Frank, 2002). On the 16 of April the same year they missed the deadline again and this time they informed the public that the financial estimates would have to be adjusted for that same year. The investigators results indicated that the family had not only bought shares with the company’s capital from itself, but the money was also used to support local events such as sports, such as Golf and hockey (Stanford Encyclopaedia of Philosophy, 2004).
The family had also been using the company property for their personal use, such as planes for vacations. The audit committee was also in shambles as it never met regularly and was only composed of just two members; Timothy Rigas and one outsider director. Later on some two other outsider directors were brought to the board and Timothy kicked out of the committee. It was in September that the three members of the Rigas family alongside Michael C. Mulcahey and James R. brown were indicted by the grand jury (Villanova University, n.d.). The former vice president, Brown pleaded guilty to the counts of bank fraud, securities fraud and conspiracy, after which he agreed to testify against the Rigas family. Brown explained to the jury how since the company was publicly listed, the financial statements would be doctored to fit the compliances. He also revealed that the company had been keeping two sets of financial books, one of which was the doctored one while the other was the one indicated the aspects of the financial books that had been altered. On the 8th of July, 2004,...

Updated on January 26, 2024

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