the ice cream parlor  

sparkee58 58M
606 posts
8/5/2006 3:40 am

Last Read:
8/10/2006 11:12 am

the ice cream parlor


I was at Border's yesterday and picked up the new Tom Petty cd and "The Great Unraveling" a book of columns from the New york Times opinion page writer, economist Paul Krugman. The pieces run from the late 90s to the early years of the new century. It makes for interesting reading. Here is his take on the corporate scandals:

Flavors of Fraud
by Paul Krugman
June 28, 2002

"So you're the manager of an ice cream parlor. It's not very profitable, so how can you get rich? Each of the big business scandals uncovered so far suggests a different strategy for executive self-dealing.

"First there's the Enron strategy. You sign contracts to provide customers with an ice cream cone a day for the next 30 years. You deliberately underestimate the cost of providing each cone; then you book all the projected profits on those future ice cream sales as part of this year's bottom line. Suddenly you appear to have a highly profitable business, and you can sell shares in your store at inflated prices.

"Then there's the Dynergy strategy. Ice cream sales aren't profitable, but you convince investors that they will be profitable in the future. Then you enter into a quiet agreement with another ice cream parlor down the street: each of you will buy hundreds of cones from the other every day. Or rather, pretend to buy- no need to go to the trouble of actually moving all those cones back and forth. The result is that you appear to be a big player in a coming business, and you can sell shares at inflated prices.

"Or there's the Adelphia strategy. You sign contracts with customers, and get investors to focus on the volume of contracts rather than their profitability. This time you don't engage in imaginary trades, you simply invent lots of imaginary customers. With your subscriber base growing so rapidly, analysts give you high marks, and you can sell your shares at inflated prices.

"Oh, I almost forgot: How do you enrich yourself, personally? The easiest way is to give yourself lots of stock options, so that you benefit from those inflated prices. But you can also use Enron-style special- purpose entities, Adelphia- style personal loans and so on to add to the windfall. It's good to be a CEO."

rm_corezon 53F
3376 posts
8/5/2006 2:38 pm

lol, yeah, and the degree to have these days is the MBA which apparently specializes in creative accounting techniques

it ain't about what you sell at all

it's about the accounting, and the quarterly report to the shareholders; cause the money is in the stock trading


sparkee58 replies on 8/6/2006 2:34 am:
And with this administration guarding the national henhouse, don't look for it to change anytime soon.
Both bush and cheney made their fortunes using the same type scams.

SirMounts 102M

8/5/2006 2:53 pm

sparkee...
Yes, there can always an element of corruption in any large organization - and in some the corruption can be widespread, ever rampant.
And considering that the Federal goverment is the largest single organization in the country, just think of how much corruption is involved there. For instance, only about 30 cents out every dollar allocated by the Federal government for the poor, actually gets into their pockets!
What a scam!!!


sparkee58 replies on 8/6/2006 2:31 am:
you're absolutely right
the bush tax cuts are a horrific scam

rm_1hotwahine 63F
21091 posts
8/5/2006 10:56 pm

Whaddya think of the Tom Petty CD?

Yeah, I'm still [blog 1hotwahine]


sparkee58 replies on 8/6/2006 2:31 am:
can't stop listening to it

AstirRelicLatah 64M
1993 posts
8/10/2006 10:45 am

If you're a senior executive in a publicly traded company there are only three things that can happen: 1. You become very rich. 2. You become unbelievably rich. 3. You become ungodly rich.

There is no personal responsibility for actions in public companies. Private companies at least have their personal life tied up in the business. The only possible exception are those public companies such as Microsoft or Berkshire Hathaway where the founders still run the show. But, all in all mostly true.


sparkee58 replies on 8/10/2006 11:13 am:
the new gimmick now is to postdate stock options for the maximum revenue

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