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Feds Probe Motorola, Adelphia Deals

Aug 9, 2002 | AP

Motorola Inc. has been contacted by federal authorities investigating Adelphia Communications over transactions that may have been used by Adelphia to inflate revenue.

The Securities and Exchange Commission and the Justice Department have contacted Motorola officials to discuss the sale of tens of millions of dollars in set-top digital boxes to the cable television company, Motorola spokeswoman Jennifer Weyrauch said Thursday.

Investigators want to know how Adelphia wound up counting a $25-per-box rebate as profit in its books, she said.

Adelphia bought the boxes for $125 apiece and later received the rebate. The rebate was to be used for marketing support, but Weyrauch said Adelphia officials are accused of using it to inflate their recorded profits instead.

"Motorola is fully cooperating with the SEC and the Justice Department," Weyrauch said.

Reading from a company statement, Weyrauch said: "The company is convinced that these transactions have been recorded on Motorola's books in accordance with generally accepted accounting principles."

Shares of Motorola rose 20 cents to close Friday at $12 on the New York Stock Exchange.

Federal authorities also contacted Scientific-Atlanta Inc., another maker of the digital boxes. The Lawrenceville, Ga., company was asked to submit documents because it had a rebate plan similar to Motorola's.

"They're investigating Adelphia, not us. How we did our accounting is appropriate," Scientific-Atlanta spokeswoman Peggy Ballard said Friday.

An Adelphia spokesman said Friday that the company told the SEC in June that it might have improperly accounted for these transactions. Officials at the SEC and the Justice Department officials did not immediately return calls seeking comment.

Adelphia executives are accused of misusing millions of dollars in company funds. An accounting scandal this spring indicated the founding Rigas family borrowed billions of dollars that weren't recorded on the company's books.

Former chief executive John J. Rigas, 78, and sons Timothy, 46, and Michael 48, were accused of stealing hundreds of millions of dollars from the nation's sixth-largest cable company, costing investors more than $60 billion. They gave up executive posts and board seats at the Coudersport, Pa.-based company a month before it filed for Chapter 11 bankruptcy protection in June.

All three were charged with nine counts of conspiracy to commit securities fraud, wire fraud and bank fraud.

Weyrauch said Adelphia still owes Motorola $80 million, and $55 million of that is covered by debt insurance. Adelphia owes Scientific-Atlanta $83 million, Ballard said.

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