What Happened in the Adelphia Scandal?
In the Adelphia scandal, three founders of family-owned Adelphia Communications Corp. and two of the company’s high-level executives were accused of fraud, conspiracy and theft on a massive scale. This was one in a series of similar fraud cases of 2002. Various entities launched investigations into Adelphia’s criminal and financial misconduct, which alleged a massive cover-up to hide the company’s increasing, exorbitant debt and rampant personal spending of company funds.
In an effort to compete with larger cable companies, such as Comcast, Adelphia began buying up new acquisitions in 1999, which grew the company’s debt from $3.5 billion to $12.6 billion. Rating agencies and shareholders demanded that Adelphia reduce this massive debt load. In response, the company began to “cook the books” by doctoring their financial records and creating fraudulent transactions and fake companies to inflate their earnings and conceal their enormous debt. By 2001, this fraudulent record-keeping attempted to cover up $250 million of debt. Adelphia filed bankruptcy in June of 2002. Timothy and John Rigas were eventually found guilty of bank fraud, conspiracy and securities fraud and received lengthy prison sentences. CEO Michael Rigas was acquitted of wire fraud and conspiracy but later pled guilty to reduced securities fraud charges and received home detention.