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June 09, 2004

Adelphia Vendors Motorola, Scientific-Atlanta Implicated in Executives' Securites-Fraud Trial

Today's WSJ ($) reports that, in the trial of two former Adelphia executives, an email and witness testimony have implicated Adelphia vendors Motorola and Scientific-Atlanta as "allegedly help[ing] Adelphia cook its books."

According to [prosecution witness Jarmes R.] Brown's testimony in U.S. District Court in Manhattan, Adelphia in mid-2000 realized it was going to miss its earnings targets, in part because of higher-than-expected expenses related to the rollout of new set-top converter boxes -- the equipment that generally sits on top of cable subscribers' televisions -- that it had purchased from Motorola and Scientific-Atlanta.

Mr. Brown testified that Timothy Rigas, one of the former Adelphia executives on trial, suggested capitalizing the marketing and advertising expenses associated with the rollout of the equipment. That would stretch out the expenses and boost Adelphia's earnings.

The article notes that "the Securities and Exchange Commission has taken a harder line on suppliers, customers, bankers and others who knowingly helped companies commit accounting fraud."

See also SEC Hammers Company's Customers for Securities-Fraud Participation.

June 9, 2004 in Criminal Penalties, Finances, Litigation, Securities law, SEC regs / actions | Permalink

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