Adelphia Communications Corporation

John Ilnicky

Business Law I

November 18, 2016

Adelphia Communications Corporation

“Adelphia” is a Greek term that means brothers and signifies heritage; this name was given to a corporation owned by brothers who engaged in family business. In the late 1990s, the organization purchased century communications for 5.2 million U.S. dollars and later became the sixth largest cable company with over 5.6 million subscribers. John Rigas (the founder of the business) started misusing the corporation’s money by buying several homes, flying people on private jets for advanced medical treatment, and more so, giving large sums of money to charities unaccounted for (Sheffield 281). Moreover, the management constructed a world-class eighteen-hole golf course and owned a large share of the Buffalo Sabres . Additionally, the directors spent more than seven hundred million dollars in the membership of an exclusive golf club. John and his team displayed all the characteristics of a fraud perpetrator, that is, invulnerability where they never cared about the loss they would incur later in life after over spending. Further, the family portrayed egocentrism whereby they lived luxurious lives at the expense of the business; the whole team displayed omnipotence and omniscience traits.

The founders of the company were charged with security violations whereby five officers were accused of wrongdoing, while the other two were found guilty, that is, John Rigas and his son Timothy Rigas. Rigas established the firm with a license worth three hundred U.S. dollars in 1952 and later made the company public in 1986, and developed it by acquiring other systems in the early 1990s. In 2002, the business collapsed following the firm’s bankruptcy after disclosing a 2.3 billion U.S. dollar off-balance-sheet debt. The court found out that the family management used a complicated cash system that compromised transparency whereby they would transfer money to different family-owned entities to cover up for pocketing one hundred million U.S. dollars. However, the New York Times discovered that this accounting scandal differed from others that had occurred earlier in that the family never sold their stock, unlike other scandalous culprits. Evidence showed that the firm was trying to hide some inconvenient facts until they could be righted, which was against the law, and it was not an ordinary crime (Bishop 42). The second son of John Rigas, commonly known as Michael, was the former vice president of the corporation and was accused of conspiracy and fraud in 2005. He was sentenced to ten months of home confinement and two years of probation after pleading guilty of entry of false financial information. More so, Michael, a former assistant treasurer of the corporation, was acquitted of all criminal charges.

The company breached fiduciary duties that were presented to the court by third-party defendants. It was based upon failure to make prior arrangements to finance the company that would later be permitted to accomplish its objective, that is, the establishment of PC networks. Inability to devote time to the business that was necessary to manage the activities of the firm efficiently was another problem that was raised by third party defendants who claimed that the corporation did not fulfill. Another harm that was alleged was on the basis of PIERCING THE CORPORATE VEIL, which was viewed as a breach of fiduciary duty whereby the corporation claimed to be damaged as a result of the reduction of their company’s interest based on the transfers that were complained by the liquidating trust. In this case, as the law requires, the corporation had suffered an injury, and at the same time, the shareholders incurred losses through diminution in stock value. However, the injury did not inflict the business directly as compared to the stockholder, whereby the shareholder (whom it affects directly) may decide to seek relief in favor of his interests against the third party. Adelphia alleged that Devon G.P and Ms. Mead owed an independent fiduciary duty to the company as its limited partner, in connection to that the general partner owes the limited partner under particular circumstances. For instance, directors of the general partnership may owe fiduciary duties to a partnership and limited partners so as not to use the control over the corporation at the expense of the organization. Therefore, the court assumes that the duties initially existed for determining whether the third party should be allowed. However, the breach of fiduciary duty to a limited partnership can only be heard in the context of the proceeding and if the third party claims for contributions and indemnity are permitted.

INDEMNIFICATION applies in the case of vicarious liability; it is only allowed whereby the party seeking indemnity is not at fault and did not contribute to the injury but was only held liable to the plaintiff vicariously. Adelphia claims that the third party defendants participated in the wrongs that formed the basis of the proceeding adversary. In this case, the third party would have to act as the sole wrongdoer, whereas Adelphia would have been vicariously liable for their wrongdoing for the law of indemnity to apply. The proceedings allege wrongdoing of Adelphia in transferring funds and failing to perform according to the laid down procedures (Giaimo 53). However, allegations on the third party complainant suggest that defendants authorized transfers to Adelphia, and, therefore, the complaint fails to fulfill the requirements of indemnification