Adelphia Withheld Data, Says Ex-Auditor
Adelphia Communications Corp. pressed former auditor Deloitte Touche Tohmatsu to certify an incomplete report to lenders and tried to withhold information from the accounting firm and the government, Deloitte said in a letter to the Securities and Exchange Commission.
The cable operator, which hasn’t released a 2001 financial report, fired Deloitte on June 9. Adelphia hasn’t said when it will be able to provide accurate results after appointing a board committee to investigate improper accounting.
Adelphia is under investigation by the SEC and prosecutors in two states after disclosing that it guaranteed $3.1 billion in loans to partnerships controlled by founder John Rigas and his family. The company also has said it overstated revenue and profit for the last two years as well as the number of cable subscribers.
The SEC is investigating Deloitte’s audit work.
Adelphia asked the accounting firm to sign off on a financial report to lenders without proof that the cable company had obtained relaxed terms under a loan agreement, Deloitte said in a June 27 letter to the SEC included in an Adelphia regulatory filing Monday.
Adelphia said it will respond to Deloitte’s statements in a subsequent filing. In a May 10 meeting with the SEC, Adelphia failed to provide regulators with a letter from company attorneys explaining Adelphia’s accounting treatment of the loans to Rigas partnerships. Adelphia later gave Deloitte and the SEC the letter after Deloitte refused to issue a report unless Adelphia did so.
Deloitte also said it became concerned about Adelphia’s accounting in April after the company transferred $102 million in set-top boxes that it had bought in October to an entity controlled by the Rigas family that didn’t have any cable operations.
Adelphia recorded the debt for purchasing the cable boxes on the books of a different family-controlled entity, which removed $102 million in debt from the company’s balance sheet. After the accounting firm questioned the transaction, Deloitte said Adelphia agreed to record the cable boxes and debt on its books.
Separately, L.A. city officials said Adelphia missed a quarterly franchise fee payment.
Adelphia shares fell a half cent, or 3.1%, to 15.5 cents in over-the-counter trading.
