Adelphia Communications
The Story
The Rigas family, who founded and controlled Adelphia (the 5th largest cable company), treated the public company as their personal piggy bank. They hid billions in debt off the company's books, used corporate funds to build a private golf course, and borrowed money to buy Adelphia stock. The fraud was exposed when a footnote in an earnings report revealed the family had co-borrowed $3.1 billion in undisclosed debt.
🚩 Red Flags
- Dominant founding family with excessive control
- Lack of independent board oversight
- Related-party transactions (company money for family expenses)
- Off-balance-sheet entities not properly disclosed
- Executives using company as personal bank
⚖️ The Fallout
Adelphia filed for one of the largest bankruptcies in U.S. history. John Rigas was sentenced to 15 years in prison; his son Timothy got 20 years. The company's assets were sold off.
📚 Lessons Learned
Highlighted the dangers of weak corporate governance and founder-dominated companies. A board must provide real oversight, not just rubber-stamp the CEO's decisions.
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