4 ms·

This is hard to follow. Were the factories profitable? If not seems like the money benifited the employees. Looks like the front line employees got hurt and th

This is hard to follow. Were the factories profitable? If not seems like the money benifited the employees. Looks like the front line employees got hurt and the community but every other employee made off with dirty money.

skybrian 5y ago
The factories (and businesses) are used as collateral to get loans from banks. The banks are getting defrauded when the company goes bankrupt and the loan isn’t repaid. The injured workers are collateral damage. If they got away with it then it would just look like a normal bankruptcy. Extracting the money already happened with more or less legitimate-looking business expenses.
- thaumasiotes 5y ago
  > The factories (and businesses) are used as collateral to get loans from banks. The banks are getting defrauded when the company goes bankrupt and the loan isn’t repaid. Defrauded? This is the entire concept of collateral.
  - selimthegrim 5y ago
    Not when the book value of the collateral bears as much resemblance to reality as that Spanish old lady’s shoddy restoration job of that Jesus fresco.
    - lotsofpulp 5y ago
      It’s the bank’s job to do proper due diligence and perform a good appraisal.
      - skybrian 5y ago
        Yes, and preventing fraud is why they do that, and sometimes, the due diligence isn't good enough. In this case, though, apparently the bank was in on it.
      - naturalauction 5y ago
        But here the banks are controlled by the people committing the fraud, presumably they are defrauding the borrowers (the books were $5.5 billion short).
- crusty 5y ago
  I would love to see dollar values or ratios and the timing on this type of scheme. If they pay $80 million in "cash" for a steel plant and then turn around and ask a legitimate bank for a loan with the plant as collateral, how much can they realistically get for the loan? Any amount is going to be a lot and the lender is assuming that risk, so one would think that due diligence would consider the unique depreciation that could occur in an asset that requires massive maintenance inputs to maintain sustainable operability and hold it's capital value, and that they would build in some contractual mechanism to monitor the value of the asset and enforce it's upkeep. Even a car dealerships does this with leased vehicles to ensure that the value of the car they get back at the end of the lease matches their projections closely enough that they can sell it off again.
  - skybrian 5y ago
    When laundering money, "clean" money is worth more to them than "dirty" money, so substantial losses would be part of the plan. And yes, banks try not to be defrauded. "Due diligence" is about catching problems like this or at least reducing them to manageable levels. But I don't know the details; I just read a book about fraud.

skybrian 5y ago

The factories (and businesses) are used as collateral to get loans from banks. The banks are getting defrauded when the company goes bankrupt and the loan isn’t repaid. The injured workers are collateral damage. If they got away with it then it would just look like a normal bankruptcy. Extracting the money already happened with more or less legitimate-looking business expenses.

thaumasiotes 5y ago
> The factories (and businesses) are used as collateral to get loans from banks. The banks are getting defrauded when the company goes bankrupt and the loan isn’t repaid. Defrauded? This is the entire concept of collateral.
- selimthegrim 5y ago
  Not when the book value of the collateral bears as much resemblance to reality as that Spanish old lady’s shoddy restoration job of that Jesus fresco.
  - lotsofpulp 5y ago
    It’s the bank’s job to do proper due diligence and perform a good appraisal.
    - skybrian 5y ago
      Yes, and preventing fraud is why they do that, and sometimes, the due diligence isn't good enough. In this case, though, apparently the bank was in on it.
    - naturalauction 5y ago
      But here the banks are controlled by the people committing the fraud, presumably they are defrauding the borrowers (the books were $5.5 billion short).
crusty 5y ago
I would love to see dollar values or ratios and the timing on this type of scheme. If they pay $80 million in "cash" for a steel plant and then turn around and ask a legitimate bank for a loan with the plant as collateral, how much can they realistically get for the loan? Any amount is going to be a lot and the lender is assuming that risk, so one would think that due diligence would consider the unique depreciation that could occur in an asset that requires massive maintenance inputs to maintain sustainable operability and hold it's capital value, and that they would build in some contractual mechanism to monitor the value of the asset and enforce it's upkeep. Even a car dealerships does this with leased vehicles to ensure that the value of the car they get back at the end of the lease matches their projections closely enough that they can sell it off again.
- skybrian 5y ago
  When laundering money, "clean" money is worth more to them than "dirty" money, so substantial losses would be part of the plan. And yes, banks try not to be defrauded. "Due diligence" is about catching problems like this or at least reducing them to manageable levels. But I don't know the details; I just read a book about fraud.