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It's unclear to me what was gained by this? 1- He got a tax deduction: ok, but it's not like that money came back to him tax free somehow. 2- His company got

It's unclear to me what was gained by this? 1- He got a tax deduction: ok, but it's not like that money came back to him tax free somehow. 2- His company got inflated numbers: ok, but not revenue. They only inflated order numbers. 3- Presumably a very small percentage of his donation came back to him in the form of dividends: ok, doesn't seem worth it to me. 4- His reputation may have been enhance: but if the deal was structured as a gift of $10mil worth of free testing wouldn't it having been just as appreciated? I fail to see how he made out like a villain in this. In fact, we used to do this type of thing when I worked at Ben & Jerry's back in the day. Just structured more as donated product, not donated money that must be used to buy product.

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jedberg 10y ago
By inflating his numbers he was able to get funding from investors at better terms. So basically he scammed his investors. The difference between direct donation of services vs money to buy those services is that the direct donation would have actually lowered his order numbers and profitability, while the monetary donation raises those same numbers. Also, by donating the money he gets to invest in his company tax free because the donation is a write off, gets filtered into the company which raises it's value, but he doesn't have to declare any capital gain, which he would have to do if he just put the money into the company (not to mention the tax on the money in the first place). It's all an accounting trick, but it's all about the optics.
- smallgovt 10y ago
  Is there any proof for this claim: "By inflating his numbers he was able to get funding from investors at better terms" The article does state the inflated numbers were reported to investors, but what makes you think this was material in any way?
  - vkou 10y ago
    What makes you think that any numbers reported to investors are material in any way? Why do we even report numbers? This is, after-all, the future, where profitability doesn't matter.
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  - x0x0 10y ago
    from the article the deal made it possible for his company to inflate, by more than 50 percent, the number of test orders it reported to investors late last year while updating them on interest in a flagship product, a diagnostic tool known as GPS Cancer. Have individual investors been questioned? No. But that's a significant increase in total orders. Also, if this was so above-board, want to take bets on whether this was disclosed to investors as money coming from related entities?
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- IanDrake 10y ago
  Hmmm... He only inflated order numbers to investors, he didn't inflate revenue, per the article. So that could be looked at in two different ways. Investors could see a stagnant growth in revenue while orders increase and get scared or they could look at the order trend and get excited. I think if Apple sold 40% more phones and revenue was stagnant, investors would freak. As far as a way to fund his company, here's two ways to put money in the business that we seem to be comparing here: 1- Take money you've earned, pay taxes on it, and then reinvest or loan to your company. 2- Take money you've earned, donate it to a charity which saves you paying taxes on that amount, then have the charity buy product from the company thus putting the money (less expenses to provide product) back into the company. If the incremental cost to provide the tests is less than the tax rate, this could be an efficient way to fund the company, but it results in no increase of ownership or interest gain.

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jedberg 10y ago

By inflating his numbers he was able to get funding from investors at better terms. So basically he scammed his investors. The difference between direct donation of services vs money to buy those services is that the direct donation would have actually lowered his order numbers and profitability, while the monetary donation raises those same numbers. Also, by donating the money he gets to invest in his company tax free because the donation is a write off, gets filtered into the company which raises it's value, but he doesn't have to declare any capital gain, which he would have to do if he just put the money into the company (not to mention the tax on the money in the first place). It's all an accounting trick, but it's all about the optics.

smallgovt 10y ago
Is there any proof for this claim: "By inflating his numbers he was able to get funding from investors at better terms" The article does state the inflated numbers were reported to investors, but what makes you think this was material in any way?
- vkou 10y ago
  What makes you think that any numbers reported to investors are material in any way? Why do we even report numbers? This is, after-all, the future, where profitability doesn't matter.
  - deleted 10y ago
    [deleted]
- x0x0 10y ago
  from the article the deal made it possible for his company to inflate, by more than 50 percent, the number of test orders it reported to investors late last year while updating them on interest in a flagship product, a diagnostic tool known as GPS Cancer. Have individual investors been questioned? No. But that's a significant increase in total orders. Also, if this was so above-board, want to take bets on whether this was disclosed to investors as money coming from related entities?
  - deleted 10y ago
    [deleted]
  - deleted 10y ago
    [deleted]
IanDrake 10y ago
Hmmm... He only inflated order numbers to investors, he didn't inflate revenue, per the article. So that could be looked at in two different ways. Investors could see a stagnant growth in revenue while orders increase and get scared or they could look at the order trend and get excited. I think if Apple sold 40% more phones and revenue was stagnant, investors would freak. As far as a way to fund his company, here's two ways to put money in the business that we seem to be comparing here: 1- Take money you've earned, pay taxes on it, and then reinvest or loan to your company. 2- Take money you've earned, donate it to a charity which saves you paying taxes on that amount, then have the charity buy product from the company thus putting the money (less expenses to provide product) back into the company. If the incremental cost to provide the tests is less than the tax rate, this could be an efficient way to fund the company, but it results in no increase of ownership or interest gain.