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Related Party Matters Essay

766 words - 4 pages

Conducting Financial Reporting
Research: Related Party Matters
Dom Panetta
Accounting 305

The topic of discussion involves the Rigas family and their Adelphia Communications Corporation scam. In 2000 they tried hustling investors into believing that their company was doing fine, when in fact they were embezzling over a billion dollars. In their year end 10-K report they noted, under related party, that they paid out over 30 million to its shareholders, which are primarily family members. The question that this paper will answer is whether or not their disclosure was justified.

Conducting Financial Reporting Research: Related Party Matters
Through the years 1980 and 2000 ...view middle of the document...

But instead of putting down “family entities” they wrote that their principle shareholders are executive officers and have equity interests, and at the end of the note they refer to their investments as “entities owned by certain shareholders.” that to me is a red flag (SEC: Aldephia 10-K Form. 2000). Why would they beat around the bush like that, unless they were hiding something. If you’re an investor, you know that the company is primarily ran by its family members. over 50% of its board members are related. So when it states that it paid over 30 million to entities owned by “primary shareholders” it makes you wonder.
In financial analysis, 10-K reports are very important. They tell investors how your company is doing and what kind of people run it. Family owned businesses are already very sketchy, especially one as large as Adelphia. So when they put those notes under “related-party” it really makes it hard for investors to trust them, after all 30 million is not considered pocket change. When you do something like that people stop investing, and more people start investigating because they don’t want their money being used for something other then business. In the case of the Rigases they used that money toward luxury condos amongst other...

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