Question 3

i) Perpetrators
In

the

Adelphia

Corporation

scandal

there

are

three

prepetrators identified. They are John Rigas, Timothy Rigas and

Michael Rigas. The interesting fact are all the perpetrators work in
family collaboration from the father to the son
John Rigas

His full name is John J. Rigas. 79 years old and resides in

Coudersport, Pennsylvania. He is Adelphia's founder and until May
15, 2002, was its CEO and Chairman of its Board. At all relevant
times, J. Rigas and members of his immediate family held five of
Adelphia's nine Board of Director positions, and exercised voting
control of Adelphia shares. On or about May 15, 2002, J. Rigas
resigned from his position as CEO and Chairman of Adelphia, and on
or about May 23, 2002, resigned his position as a director of
Adelphia, pursuant to a request by the Special Committee.

Timothy Rigas

His full name is Timothy J. Rigas. 48 years old and resides in

Coudersport, Pennsylvania. He is J. Rigas' son and was, at all
relevant times, Adelphia's CFO, CAO, and Treasurer, as well as an
Adelphia director. On or about May 16, 2002, he resigned pursuant
to a request by the Special Committee. Between approximately
December 1992 and June 2001, T. Rigas was chairman of the Audit
Committee of Adelphia's Board.
Micheal Rigas

His full name is Michael J. Rigas. 50 years old and resides in

Coudersport, Pennsylvania. He is J. Rigas' oldest son and was, at all
relevant times, Adelphia's Executive Vice President for Operations
and Secretary of Adelphia until he resigned pursuant to a request by
the Special Committee on or about May 23, 2002. M. Rigas is an
attorney licensed in the District of Columbia.

ii) Modus Operandi

In this case, the perpetrators John Rigas and Timothy Rigas
was commit for two chargers which are financial statement fraud
and misappropriation of asset. This fraud include hiding $3.4 billion
from the financial statement and withdrew the company money for
personal use worth $2.3 billion.
How they did it?
In order to get more investor to invest into Adelphia
Corporation or ensure the current investor to remain maintain, they
should give a great report about their company in the side of
management and financial. Therefore, they were producing good
income statement to show the public and meet the analysis
expectation eventhough they face a billion dollar of debt. To make
sure this fraud work smoothly, they were hiding the debt into book
off balance sheet.
Beside that, they was used Adelphia money to fullfil their
levish living expenses. This is done by lending loan worth $2.3
billion to the Rigases for personal use. All this money are using for
construct their world class golf course and buying luxury apartment
in Manhatten and other places. All this loan was shifted to
unconsolidated affiliates and they used sham transaction and

fictitious document to show the loan have been repaid. Therefore

Rigases can get the money for free without any comitment to pay it
back.
Then, Rigases also created private partnership with adelphia
as a tool for the self dealing scheme. This was done by making fund
transfer through journal entry that gave Adelphia more debt and the
Rigases multi million dollar of asset. Also, all the revenue of
Adelphias subsidiary and other business are dumped into one
central account and the money will channel to Rigases pocket.

The diagram above explain how the transaction tooks place.

For example, for the funding of Rigases family owned farm, the
expenses were classified under landscaping, maintainance of
Adelphia journal. The same thing also happen for the ticket for
buffalo

sabre

dealership.

hockey,

interior

design

shop

and

private

car

Question 4
The Red Flag for Adelphia Corporation Case
i)

Crony
In Adelphia top management, it consist most of Rigases
family member. As a one family in the management,
therefore it is easier for them to commit a fraud because
Rigases crony can control the company management and
financial.

Chief Executive
Officer
John Rigas

Chief Financial
Officer
Timothy Rigas

ii)

Luxury Lifestyle
All the Rigases have Executive
luxury lifestyle. Their Vice
lifestyle is
President of
Operation
beyond their means. In fact
of the expenses make are
Michael
Rigas
cannot afford by a normal
CEO. The expenses
talked about
are Rigases construct personal world class golf course and

own several luxury apartment in Manhattan and other

places.
iii)

Embezzelment of asset
As the one who control the Adelphia, Rigases take this
advantage by using company asset for their own purpose.
This is including using Adelphia money to fund their
personal stock worrh $252 billion. They also always use the
company private jet including watching African Safari
where normal CEO just using car to do same purpose.

iv)

Fictitious
All the information about Aldephia was been faked and
hiding. The purpose are to meet the analysis expectation
and show the stability of the company and the same time
attract new investor. To fullfil this purpose all the debt
worth $3.4 billon are not appear in financial statement and
was hiding in the book off balance sheet.

v)

Weak Internal Control

Eventhough this fraud are happen for long time ago, but it
didnt detect by anybody. This is because the internal
control of Adelphia is very weak which all the transaction
did not monitor well and even the auditor committee didnt
identify

all

the

fraud

occur

beside

Rigases

control

everything. As a result, a lot of fake transaction happen in

the Adelphia on behalf of Rigases entity.

Question 5
Conclusion
As a conclusion, court have charges John Rigas and Timothy
Rigas 18 count for conspiracy, bank fraud and security fraud while
Michael Rigas are found not guilty for conspiracy and wire fraud.
Timothy Rigas was sentenced for 20 years in prison while John Rigas
only 15 years in prison as his age already old.

Deloitte

&

Touche

the

Adelphia

auditor

was

sued

for

professional negligence, breach a contract and other wrongful

conduct. In order to continue Adelphia subsidiary operation,
Hanover Insurance was agree to credit $95 million.
All of the asset of internet communication was acquired and
bid by Time Warmer and Comcast Communication. To avoid bid war
which estimated $21 billion, they was joint together to acquired the
asset. While the line telecomunication asset of Adelphia was
acquired by Pioneer Telecomunication for $1.2 million.

Last but not least, the fraud is the bad action that people
should avoid. Most of the case, people will happy at the beginning
but lastly they will suffer because they are watching by public and
the economy fluctuation will make the fraud detected especially
when it involve with stock.