Explain why you think the market value of Adelphia fell so dramatically with the footnote disclosure that the company had guaranteed loans to an entity owned by the companys CEO and his family.

CHAPTER 13:

In its 2001 annual report, investors of Adelphia Communications were startled to find a footnote in its financial statements that reported the company had guaranteed as much as $2.7 billion in loans to a private entity owned by CEO John Rigas and his family. As a result of the footnote, Adelphia lost more than 50 per- cent of its market value in little more than a week.

Question: Explain why you think the market value of Adelphia fell so dramatically with the footnote disclosure that the company had guaranteed loans to an entity owned by the companys CEO and his family.

CHAPTER 14:

For many large, international companies that do business in less developed countries, corruption is a part of everyday life. Without bribing public officials, their companies could never build a factory, hire employees, get permission to build infrastructure, or receive shipments from international vendors. Shipping merchandise out of these countries can be equally difficult, with customs agents demanding unofficial payments to allow the shipment to be made.

1. If you worked for one of these companies, how would you respond to being asked by your boss to pay a bribe?

2. Are such bribes a necessary part of doing business abroad?

3. Most importantly, explain this in the context of the FCPA laws.

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