Adelphia investigation engulfs set-top vendors

Federal investigations into Adelphia Communications’ financial dealings have engulfed set-top box vendors Motorola and Scientific-Atlanta, who are cooperating with the multiple investigations. Both the SEC and the U.S. Justice Department are studying how Adelphia reported set-top box rebates provided by the companies.

“[Adelphia] paid $125 for each set-top box, and Motorola, in turn, gave them a $25 rebate that would be used as marketing support,” said a Motorola spokesman. “As far as our books, we reported it as $100 per set-top box.”

The rebates were to be used for marketing purposes, but the feds believe Adelphia officials used them to inflate their recorded profits instead.

The rebates are an accepted practice among vendors, said a Motorola spokeswoman.

“We do things like marketing support with other customers in our other businesses,” she said. “An example might be Motorola in our cellular phone business with Verizon and AT&T.”

S-A, which had a bigger share of Adelphia’s set-top business and has been hit harder by the cable company’s bankruptcy than Motorola, also did “marketing dollars” with them, a spokeswoman said. “All our accounting practices were appropriate. It was an expense for us.”

The S-A spokeswoman said, “Individuals [have been] asked to testify in Adelphia’s investigation. I can’t say who, but we have been asked to produce documents.”

Investigators contacted both companies in the May/June time frame.

Adelphia executives are accused of financial shenanigans involving millions of dollars of company funds used for personal expenses. Founder John Rigas and sons Timothy and Michael--all former executives with the company--were charged with nine counts of conspiracy to commit securities fraud, wire fraud and bank fraud in connection with accounting practices that cost investors more than $60 billion. All relinquished executive positions and board seats a month before Adelphia filed Chapter 11 bankruptcy in June.