At 12:06 PM 12/18/2009, Mauro Lacy wrote:
You maintain this business as long as you can, and when things are
starting to get murky(really murky) and "profits" are falling, you
suddenly fire all your employeess, close offices, and disappear in your
private jet, to have a well deserved recess in your private island.
Come to think of it, a perpetual motion machine is the ideal project for
these kind of business. And now that the world is turning "green", time is
ripe.
That's right. See, those who collected those salaries, high enough to
give them plenty of cash to console them for the eventual loss of
their high-paying job as the chief executive, didn't make a profit
from investment in the company. They may have invested, themselves,
they have a loss on paper, but a net profit, a hefty one, from the
salaries. If they sold stock at a profit, knowing it was really
worthless, they'd be in trouble as insiders, but if they avoid that,
what's to prosecute?
If they are careful to avoid fraud that isn't merely hype or puffery,
i.e., it isn't outright lying to extract cash or property, there is
little risk of prosecution. The danger, though, is if some of those
investors don't take it lying down. The scenario described involves
some big investors who take large losses. Sometimes if they get
pissed, they get even and don't care about the law.
I think that Steorn has avoided this, my guess, or one of those
investors would have blown the whistle, realizing that they'd been
had. I suspect that any large investors know exactly what is going on.
It is even possible that Steorn never shuts down, if they manage a
transition to selling a real product that actually works, as they
have started to do. Depends on exactly how they conduct themselves,
how greedy they are, etc.
