Adelphia 'Cooked the Books', Insiders Allege

10 June 2002

The affairs of struggling US cable operator Adelphia Communications are even worse than has been reported, people close to the situation said Friday.

Insiders allege that the company’s total subscriber base has been inflated by up to ten percent – equivalent to between 400,000-500,000 homes. They also charge that Adelphia maintained two sets of capital expenditure accounts – one of which hiked the amount spent on upgrading its cable network and was aired to investors and analysts; the other set reported the true situation.

The Securities and Exchange Commission is currently conducting an in-depth probe into affairs of the Coudersport, Pennsylvania-headquartered company, while two federal grand juries, in Pennsylvania and New York, are conducting a criminal investigation.

Of particular interest to the triad of investigators is Adelphia’s actual (as opposed to reported) subscriber numbers – widely regarded by stockholders and creditors as a key indicator of a cable company’s fiscal health.

According to an involved source, the spotlight is also on the role played in the Adelphia Story by its auditors Deloitte & Touche. Investigators are probing what Deloitte knew about related-party transactions, co-borrowing arrangements and subscriber inflation – and whether this knowledge was imparted to the group’s board? The SEC is asking if Deloitte “knew things and didn't bring them to the board’s attention,” said the informant.

Hands aloft in pious innocence, Deloitte declared its belief that “our work for Adelphia complies with all applicable professional standards and we are confident that a final review of the matter will demonstrate this to be the case.” The firm declined to comment further, citing its “professional obligation of client confidentiality”.

Monday 08.00 BST

According to a report from the the Wall Street Journal Online the board of Adelphia, meeting Friday afternoon, dismissed Deloitte & Touche as its auditor, citing its failure to inform Adelphia's audit committee about questionable accounting practices and self-dealing, according to sources close to the ongoing saga. Deloitte has been informed of the decision and will quit immediately another auditor has been appointed.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff