By

University student

COMPANY BACKGROUND
Started by John Rigas and his brother, Gus
in 1972
Adelphia is the Greek term for
brothers
In 1986 the corporation went public
In the late 1990s became the 6th largest
cable company

A Family Business

Family business and always be family business

Run by the Rigas

Adelphia timeline
The rise and fall of Adelphia Communications and its founding Rigas family:
1924: John Rigas is born in Wellsville, N.Y.
1943: Graduates high school and drafted into the Army. He serves in World War II in Belgium,
France and Austria.
1946: Discharged as private first class and enrolls at Rensselaer Polytechnic Institute in Troy,
N.Y.
1950: Graduates in management engineering. Returns to Wellsville to work in the family
restaurant and, later, a Sylvania plant.
1951: Pays $72,000 for a run-down movie theater in Coudersport, Pa.
1952: Pays $300 for a local cable franchise in Coudersport.
1953: Marries Doris Nielsen, who that year gives birth to Michael Rigas.
1954: John Rigas' brother, Gus, joins the franchise.
1956: Timothy Rigas born.

 1972: The company incorporates as Adelphia, from the Greek for "brother.
1983: John Rigas buys out Gus' stake as his three sons join Adelphia.
1986: Adelphia goes public.
1994: John Rigas pays $22 million for Buffalo Sabres stake.
1999: John Rigas has triple heart bypass and later is diagnosed with bladder cancer. That
year he pays $8.5 billion for Century Communications, FrontierVision Partners and Harron
Communications. That nearly doubles Adelphia's size, making it the No. 6 cable operator at
the time, and adds greatly to its debt.
2000: Rigas backs an office tower in Buffalo and buys control of the Sabres.
2001: Rigas is inducted into the Cable Television Hall of Fame.
2002: In March, Adelphia discloses it provided collateral for $2.3 billion in loans to the
Rigases. In May, as the stock plummets amid reports of financial scandal, Rigas and his
family are forced out of the company. In June, Adelphia files for bankruptcy-court
protection. In July, five executives including John, Michael and Timothy are arrested
on charges of fraud. One pleads guilty and cooperates; the Rigases and Michael Mulcahey
choose to go to trial.

The Fraud triangle is a framework designed

to explain the reasoning behind a workers
decision to commit workplace fraud

 Pressure is the motivation behind the crime and

can be either personal financial pressure, such as
debt problems, or workplace debt problems Eg:
Maintenance of a lifestyle

 Opportunity
o Means by which the individual will defraud the
organization.
o As the top management consist of Rigas family member,
it is make to commit fraud become easier

Rationalization
o Rationalizations are often based on external
factors, such as a need to take care of a family,
or a dishonest employer which is seen to
minimize or mitigate the harm done by the
crime.

Perpetrators
John Rigas
79
Chief Executive Officer

Michael Rigas
50
Vice President for Operation

Perpetrator
Timothy Rigas
48
Chief Financial Officer

Modus
Operandi

What was happen

Hiding 3.4 billion of debt
Withdrew money from the company for
personal use
Lying the public
o Rigas management manipulated the book to meet analysis
expectation

How They Did It?

Adelphia backed $2.3 billion worth of
personal loans to the Rigases
Rigas Management manipulated the books
to meet analysts expectations and inflate
the stock price
Rigases created private partnerships
w/Adelphia as a tool for the self-dealing
schemes.

o Fund transfers were made through journal

entries that gave Adelphia more debt and the
Rigases multi-million dollar assets at no cost.

 Rigas Management commingled Adelphia funds

with family funds causing Adelphia to fund noncorporate projects, such as:
o Personal loans
Its worth for more than 2 billions dollar
The loan was paid up by making false document

o Cash advances to the Buffalo Sabres

o $252 million to pay margin calls, or demands for cash
payments on loans for which the family had put up
Adelphia stock as collateral.

How They Did It?

Revenues from Adelphia subsidiaries and other
businesses were dumped into one central
account. They used this account to pay bills.
They also excluded they billion dollar from liability
in financial statement by hiding it on the books
off balance sheet affiliates

Buffalo Sabres
Hockey
Family-owned
Farm

Rigas Family Entities

Interior Design
Shop
Private Car
Dealership

Money to the Rigases

Leased Vehicles to
Adelphia

Money to the Rigases

Furniture/Design
Services to Adelphia

Money to the Rigases

Landscaping, Maintenance to
Adelphia

Money to the Rigases

Tickets to Adelphia

How the Fraud took place

Transaction Account from Adelphia Communications

What happen to
perpetrator?

The Red Flags

Crony
In Adelphia top management it consist of most of
Rigas family member
Its easy for them to commit fraud because they
can collaborate together
John Rigas Chief Executive Officer (CEO)
Tim Rigas Chief Financial Officer (CFO)
Michael Rigas Vice President of Operation

Luxury Lifestyle
The have luxury lifestyle
Their lifestyle is beyond the meets
For Example,
o Construct world class golf course for personal use
o Own luxury apartment in Manhattan

Embezzlement of Assets
The use a lot od Adelphia assets for personal
purpose
For Example
o Always use company private jet including watching African safari
o Use Adelphia fund for personal stock worth $252 million

Accounting Anomalies
The debt did not appear as a liability on the
company balance sheet because it was hidden in
the accounting record of off-balance sheet
affiliates.
Therefore, they can meet the analysis
expectation and show the stability of the
company, especially for attract the investor

Weak Internal Control

The fraud happen for a long time
A lot of false transaction happen in the company
For example,
o The Rigas have been make a lot of transaction on behalf of Adelphia for
their personal family entities.