IntroductionCommonwealth guidelines defined fraud as an act of dishonestly and obtaining benefit through deception or through unethical means. Some of the behaviors’ which may qualify as fraud include; false and providing misleading information, theft, bribery, failure to provide information when it is your duty and obligation to do so, abuse of office and corruption. In order to determine whether a fraud was committed within the organization, then it is important to ask the following questions; did the activity or action result into direct or indirect benefit in terms of money or other tangible or intangible benefits to the people who are not entitled to them? , was the action committed was unlawful? , Was falls representation employed in getting the benefit?
Or any attempt was made towards advancing self-interest or above activities? This paper has analysed two cases of fraud of different classification) that happened in Australia in the past ten years. The paper will analyse the two cases separately and discusses key differences and common features of the two fraud cases. The paper will further presents the recommendations on how victims and other concerned parties could prevent these types of frauds. Case 1:Adelphia Cable Companyin 2002In Australia, one of the common and well known fraud case happened in Adelphia Cable Company in the late 2002, during the Wall Street crisis.
Adelphia was formed in 1952 by John Rigas with customer base of less than 25; the company grew rapidly in the cable industry and by the beginning of 1970’s the customer base grew to over 6000 customers. After its incorporation, by late 1980, the company stated trading publicly in the stock exchange. The cable industry began weakening by early 1990’s due to high competition in the industry, over capacity and slow economic growth consisting of high inflation rates, Mahar and Fischers, (2003).
This became a golden opportunity for Adelphia to expand to internet cable business and in the telecommunication industry. This ambitious expansion made Adelphia to be one of the biggest companies by late 1990.In the year 2002, the first fraud activity was detected in the company operations when the chief finance officer revealed in a conference that a loan of over $2.3billions has been cosigned by another company in which John Rigas was a partner in.
According to Nazum (2004), this resulted into criminal inquiry by the board of stock exchange. The investigation was back dated to 1999. This forced Rigas and his family to resign from the company. The share price of the company drastically dropped from around $28 to close to 78 cents forcing SEC to deregister the company from trading in the stock market Benett et al, (2005). Due to this the company was forced to apply for bankruptcy notice in order to reorganize its activities. The fraudulent activities in the Adelphia Company included among others; hiding debt among its subsidiary in which there was misrepresentation of fact for the benefit of the co-founder of the company.
This information gave the investors false representation of the Company as the debt of the subsidiary was increased while that of the Adelphia was decreased with the same amount showing the company was liquid and is able to pay off its debts which was not the case. This continuous misrepresentation made the public to know that the company was indeed performing well which was not the case and this actually made the public to think that the company management was just keeping fictitious document to proof their transactions which were not there.