Deloitte Settles Adelphia Case for $50 Million - - CFO.com
Well there is some closure at least. After about 3 years, the Adelphia case may be over! In a move seen as both an attempt to stay out of Jail and to clear the way for a pending takeover, the Rigases, Adelphia itself, and the former Auditors all agreed to pay into a fund to help compensate victims of the fraud.
The Rigases agreed to turn over about $1.5 Billion of assets to Adelphia which in turn will pay about half ($715 million) into the fund. Additionally Deloitte agreed to pay $50 million (including a $25 Million fine) for not catching the fraud and for insufficient safeguards against the fraud.
Some of the highlights of the case:
From CFO.com
"The Rigas family, which founded the now-bankrupt cable giant, will forfeit 95 percent of its assets — totaling more than $1.5 billion — under a settlement with the U.S. Attorney's office for the Southern District of New York and the SEC. Those assets — including cable systems valued at $700 million to $900 million and bonds valued at $567 million — will be turned over to Adelphia. Upon emerging from bankruptcy, the company will then pay $715 million to create a fund to compensate victims of the fraud, according to the commission."
From the Boston Globe:
"The settlement should help clear the way for Adelphia's acquisition by Comcast Corp. and Time Warner Inc., the two largest US cable television companies, said Sanford C. Bernstein & Co. analyst Craig Moffett. Comcast and Time Warner said last week they would buy Adelphia for $17.6 billion in cash and stock, the biggest transaction in the industry in two years."
From CNN:
"Deloitte, one of the Big Four accounting firms, will pay a penalty of $25 million and another $25 million in a related administrative proceeding, the SEC said. The total will go into "a fund to compensate victims of Adelphia's fraud," it said."
From Marketwatch:
""What is especially troubling here is that Deloitte recognized the risk of fraud posed by this client at the outset," said Mark K. Schonfeld, director of the SEC's Northeast Regional Office, in a statement."
From the NYPost:
"Members of the Rigas clan, led by 80-year-old patriarch John Rigas were accused of siphoning more than $2.4 billion from the company to spend freely on real estate and other investments.
The elder Rigas and his son Timothy, 48, the ex-CFO, were convicted last summer of fraud and conspiracy and will be sentenced June 1. They could get leniency due to the pact,"
From the NY Times:
"In turning over their assets to Adelphia, the Rigases are giving up virtually all of their holdings. The settlement would leave the Rigases with about $79 million in assets."
And finally, here is what NPR had to say about it.
For those of you outside of the local area, Adelphia was headquartered in Coudersport PA (about 45 minutes from St. Bonaventure). Due to local interest (the Rigas were generous donors to SBU), Carol Fischer and I wrote 2 cases on Adelphia back in 2002 and 2003. Each was published but to be honest I can not remember where. I think one was under the name Philippe at Bquest and one was in the Journal of Accounting and Finance. It was more accounting based, but unfortunately I can not find an online version of it.
I do have a working copy version (before an editor told us to change the name) of the Finance oriented casethat I currently am using in my MBA classes.
Here are powerpoint slides from a presentation we put on based off of the paper.
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