The Adelphia Scandal

1121 words 5 pages
The Adelphia Scandal In 1952, John Rigas purchased his own cable company. By the late 1990's, he had turned it into the sixth largest cable company in the United States with 5.6 million customers. The business was always run as a family style business which led to fraudulent acts among family members and upper level executives. The family has been accused of stealing $3.1 billion from Adelphia and is now facing criminal charges. Adelphia was forced to file chapter 11 bankruptcy and as of April 24, 2004, the new board of directors made the decision to break up the company and sell it. The Adelphia scandal is morally wrong because the Rigas family coerced and exploited employees, harmed all stakeholders as well as stockholders, and …show more content…
A good analogy of the Adelphia scandal would be a poker game where the dealer (Adelphia) is cheating, and the gambler (stockholder) gets cheated. Harming the stockholders is immoral because they have been misled by the company and because the company was not managed in the stockholder's interest. Another reason that the Adelphia scandal is morally wrong is because it harmed the cable industry. When the Adelphia scandal appeared in the news media, it affected the credibility and stock prices of the entire cable industry. For example, AT&T and AOL Time Warner shares declined more than 10%. In addition, from May to July of 2002, Cablevision shares dropped 35%. Stock prices dropped in other cable companies because investors no longer trusted the cable industry because of what happened with Adelphia. In addition, Adelphia owed the companies of American Movie Classics & Bravo, AOL Time Warner Networks (HBO), Viacom channels (Showtime, MTV, and BET), ESPN & Disney Channel a sum total of over $123 million. This amount of money was a loss that these companies had to write off as an uncollectible amount because Adelphia filed bankruptcy. Adelphia owed a debt to these companies and because of the Rigas family's fraudulent acts, this debt will never fully be paid back. Adelphia should have realized that corporations today

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