May 28: Adelphia forges agreement with DIP lenders for access to $1.5 billion facility.
June 4: Four carryover directors announce plans to resign from Adelphia’s board.
July 31: Adelphia files its schedules of liabilities and statement of financial affairs.
October 23: Adelphia amends its schedules of liabilities and statement of financial affairs.
October 24: Bankruptcy court sets the bar date for January 9, 2004.
Source: Adelphia Communications
New executive brooms at WorldCom and Tyco clear out the remnants
Adelphia isn’t the only high-profile, scandal-plagued company in need of an extreme makeover. Both WorldCom Inc. and Tyco International are striving to restore their good business names, even as the executives who sullied their reputations await trial.
Amazingly, WorldCom, author of the biggest scam of all—where former CFO Scott Sullivan and others are alleged to have cooked the books by a stunning $11 billion—is already poised to exit bankruptcy under the moniker of its largest acquisition, MCI. And instead of staggering under the weight of $40 billion in debt, it will have a manageable $5.5 billion.
The new MCI will also boast a state-of-the-art system of controls and corporate-governance practices. “They seem to be on their way from worst in class to best in class,” says Nell Minow, chairman of The Corporate Library, a corporate-governance research firm. “They are doing all the right things.”
Those things include sweeping out the board room and executive offices and hiring Michael Capellas, former president of Hewlett-Packard Co. The board appointed independent board members known for their integrity, including former U.S. Deputy Attorney General Eric Holder and Dennis Beresford, former chairman of the Financial Accounting Standards Board. Last April, MCI hired Robert Blakely, a respected former CFO of Tenneco with 21 years of experience, as CFO.
MCI also conducted a vigorous internal investigation, headed by former Securities and Exchange Commission director of enforcement William McLucas. When it was finished, the company asked for the resignations of 50 employees. Many were not accused of taking part in the fraud, but had a high likelihood of being aware of it. “People who looked the other way have demonstrated their uselessness,” says Minow. “They have to go. They are no less culpable.”
The company has also established a corporate-ethics office that reports to Capellas. “We can’t afford to be anything less than ‘best of breed’ in corporate governance and ethics,” asserts Beresford.
Breen Sweeps Clean
At Tyco, meanwhile, CEO Edward Breen wasted no time in exorcising the inner circle of former CEO Dennis Kozlowski. Immediately following his July 2002 appointment, he fired about 50 executives, as well as the entire board that had hired Breen himself. He then assembled his own team of nine independent directors.
Next, Breen tapped former United Technologies CFO David FitzPatrick to replace the post vacated by Mark Swartz, who, like Kozlowski, is under indictment for looting the company of some $600 million. “Breen and FitzPatrick hail from companies with long-term perspectives, and are more patient about growth,” says Brian Langenberg, a principal at Langenberg & Co. in Chicago.