Adelphia Communications Corporation

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According to corporate governance, directors of a company should owe a DUTY OF LOYALTY to a company. In this case, the directors of Adelphia breached this rule as they placed themselves in positions where they could acquire personal interests. The Alaska code requires that material facts regarding matters of interest are fully disclosed to either the shareholders or the board. That way, transparency is assured as the top management is accountable for all their actions and chances of fraudulent actions are reduced to a significant threshold.

DUTY OF CARE is a legal requirement, imposed on individuals requiring them to adhere to a given standard of reasonable care while performing actions that would result in the harm of others. In this case, the Rigas family did not adhere to this code as they were self-centered and focused on their individual interests. More so they did not care about the welfare of other shareholders and the general public that was benefiting from the services of the company. Misuse of public funds was a clear indication that they were only concerned with their personal interests.

The company’s activities were affected in that it had various debts racked up by the Rigas family that were not listed in the financial statement. As a result, the company was operating at a debt worth 2.3 billion U.S. dollars taken from off-sheet loans; this means that the corporation was heavily indebted without the consent of the STAKEHOLDERS. Consequently, the company’s financial capabilities fell apart (Sheffield 306). In addition to the loans, the company’s assets, that is, furniture and cars were made from companies owned by the fraudulent family. Further, this means that the family had been milking out finances for personal interest from the enterprise. As a result, bankruptcy widely affected the functionality of the company as the firm would not continue operating at a loss, and the shareholders incurred great losses that later led to the fall of the enterprise.

The corporation later announced the sale of PREFERRED STOCK to institutional investors with an aggregate liquidation of one hundred and fifty dollars. The funds were affiliated to one of the family members of the Rigas: that is John Rigas who was by then the chairperson of the company. Later the company announced the sale of perpetual convertible preferred stock with a liquidation preference of a hundred dollars in a private corporation affiliated with the Rigas family. The firm intended to use the net profit from the sale of preferred stock to repay the existing indebtedness. However, the convertible and exchangeable preferred stock had not been registered under the securities act and, therefore, did not qualify to be offered or sold in the United States.

Later, the charges were withdrawn, and one of the judges responsible for this case quoted Kenny Rodger’s song stating that the government had decided to end the unfortunate Rigas saga. The judge said that the case was a highly questionable misuse of the scarce resources of the state. However, the Rigas family still runs a cable company; after the trial, two of their enterprises were surrendered to the federal government and were later sold. Nonetheless, the remaining two companies served over four thousand people in the northern tier.

In conclusion, it is clear that the Rigas family had a motivation to ruin the company to achieve their personal interests. Their fraudulent activities resulted in the bankruptcy of one the leading companies in the United States; this signified that greed always leads to adverse outcomes. From the case discussed above, it is clear that typically, most individuals in top management are the number one contributors in fraud activities as they have the mandate to control actions in organizations. Therefore, it appears that accountability and transparency should be focused on top employees in a bid to minimize fraud activities.

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Works cited

Awan, Abdul Ghafoor, and Muhammad Saeed Akhtar. "Problems of Corporate Governance In USA." European Journal of Business and Innovation Research 2.2 (2014): 55-72.

Bishop, Susan. "Adelphia: An Exploratory Case Study of Corporate Culture and Ethical Judgment." (2015).

Cohen, Jeffrey, et al. "Corporate Fraud and Managers’ Behavior: Evidence From the Press." Entrepreneurship, Governance, and Ethics. Springer Netherlands, 2012. 271-315.

Giaimo, Christopher J., Ferve E. Ozturk, and Dena S. Kessler. "Cash-Management Accounts and Fraudulent Transfer Actions." American Bankruptcy Institute Journal 33.8 (2014): 46.

Sheffield, Hilary, and Adam Smith. "In re Adelphia Communications Corp." (2012).