Adelphia Case 1
Adelphia
Case Summary
The Allegations: Prosecutors say members of the cable company's founding family and two former executives looted the firm "on a massive scale," spending company funds on personal expenses, such as a $12.8 million golf course. The firm has been accused of hiding business relationships between Adelphia and entities tied to the founders and for inflating its financial results.
Who's Who:
• John J. Rigas, Adelphia's founder
• Timothy Rigas, former CFO
• Michael Rigas, former executive VP
• James R. Brown, former vice president
• Michael C. Mulcahey, former vice president and assistant treasurer
What's happened: All were indicted on federal fraud charges. The SEC filed civil charges, and Adelphia sued the Rigases. The individuals and company have denied wrongdoing.
Questions
1) What breaches of fiduciary duty does the Adelphia case raise?
Directors breach of public fiduciary responsibilities to the company and clients. The Riga’s family practically uses the Adelphia as their family piggy bank, withdrawing funds when they needed for their own purposes. They had to act in the best interest of the company, yet when their poor management let to the company’s tight financial position, they began to commit fraud.
2) Why do you think the Rigas family thought they could get away with using Adelphia as their own piggy bank?
They thought they could get away with it, given the fact that it was formed and established by their family. Also, members of the Rigas family held four seats on the firm’s seven-member board, John Rigas (chairman and CEO), his son Timothy Rigas (CFO) and Michael Rigas (vice-president of operations). This facilitated any transactions they engaged in, without little or no intervention.
3) What allowed the Rigas family to get away with their fraudulent behavior for so long?
Due to the fact that the company had mostly family members at the top, running the company, there was little or no intervention.
4)
Case Summary
The Allegations: Prosecutors say members of the cable company's founding family and two former executives looted the firm "on a massive scale," spending company funds on personal expenses, such as a $12.8 million golf course. The firm has been accused of hiding business relationships between Adelphia and entities tied to the founders and for inflating its financial results.
Who's Who:
• John J. Rigas, Adelphia's founder
• Timothy Rigas, former CFO
• Michael Rigas, former executive VP
• James R. Brown, former vice president
• Michael C. Mulcahey, former vice president and assistant treasurer
What's happened: All were indicted on federal fraud charges. The SEC filed civil charges, and Adelphia sued the Rigases. The individuals and company have denied wrongdoing.
Questions
1) What breaches of fiduciary duty does the Adelphia case raise?
Directors breach of public fiduciary responsibilities to the company and clients. The Riga’s family practically uses the Adelphia as their family piggy bank, withdrawing funds when they needed for their own purposes. They had to act in the best interest of the company, yet when their poor management let to the company’s tight financial position, they began to commit fraud.
2) Why do you think the Rigas family thought they could get away with using Adelphia as their own piggy bank?
They thought they could get away with it, given the fact that it was formed and established by their family. Also, members of the Rigas family held four seats on the firm’s seven-member board, John Rigas (chairman and CEO), his son Timothy Rigas (CFO) and Michael Rigas (vice-president of operations). This facilitated any transactions they engaged in, without little or no intervention.
3) What allowed the Rigas family to get away with their fraudulent behavior for so long?
Due to the fact that the company had mostly family members at the top, running the company, there was little or no intervention.
4)