Epic self-dealing by members of the Rigas family went undetected. Board has ousted worst offenders, withheld $4.2 million in severance for founder John Rigas. But for Adelphia shareholders, it's too little too late.
Biggest governance failure in modern corporate history. The board twice waived its ethics guidelines to allow the CFO to participate in off-balance-sheet deals. Ignored warnings from auditors concerning "high-risk" accounting. Failed to follow up on allegations from whistle-blower Sherron Watkins. Directors disavowed responsibility for company failure under oath before Congress.
Three of seven directors are insiders. Audit committee lacks anyone with hands-on finance or accounting experience. Company is in bankruptcy. Accounting is under investigation. But chairman Gary Winnick is sitting pretty: He sold $735 million in stock before company's collapse.
METROMEDIA FIBER NETWORK
Before a bankruptcy filing in May, three of board's eight members had ties to Metromedia or affiliated companies. The SEC is investigating accounting problems. The company has announced it will write down $4 billion in assets and restate financials for three quarters in 2001. Several directors sold more than $150 million in stock before the company's problems became widely known.
Disgraced CEO Dennis Kozlowski and others are alleged to have illegally siphoned off more than $100 million in corporate assets. An internal probe revealed that at least three directors or their companies for years received undisclosed Tyco payments for aircraft leases and legal services. To its credit, the board booted out director Frank Walsh after he refused to return $20 million he received for facilitating the CIT Group merger. Tyco is suing Kozlowski to recover five years of income and severance. All nine Kozlowski-era directors are leaving next year.
Retail downturn plus massive debt and restructuring charges drove Linda Wachner's once-mighty underwear empire into bankruptcy last year--while the board snoozed. It didn't ask for Wachner's resignation until five months after the bankruptcy filing. Meanwhile, accounting errors forced the board to restate three years of financials. The SEC is considering enforcement action against the company. Two steps in right direction: recruiting a former American Express CFO for board and fighting Wachner's demand for $25 million in severance.
The board signed off on financials that had overstated profits by $7.1 billion since 2000. Clifford Alexander Jr., who left the board in January after missing half the meetings in 2001, is chairman of Moody's Investors Service, which didn't downgrade WorldCom bonds until April. Chairman Bert Roberts owns a company that was paid $405,000 by WorldCom to provide air-transportation services. Since the bankruptcy filing in July, the board has added three independent directors and initiated a search for a permanent CEO.