CompuServe Messages

Malcolm, I suspect it was a kind of 'money laundering'. I don't mean in the sense of turning illegaly gained profits into appearing to have come from a legal source…but rather a method of showing a large write off from a small investment. It happens here in the broadcast industry all the time. I once worked for a radio station. It was sold three times in the 8 years I was there. Each time, the new owners cut back on things and claimed they were losing money on the operation…yet each time it sold…it sold for a much higher price that it was bought for. I got friendly with one of the general managers and asked how the system worked. He was quite candid with me…if you looked at the ownership papers, you found the local station was a separate corporation. That corporation was a wholy owned subsidary of a holding company…generally…one holding company per station! That holding company in turn…was owned by a 2nd holding company that may have held 2 or 3 other holding companies. That 2nd level company was held in turn by a 3rd level company! And that 3rd level company was owned by the broadcaster. The broadcaster was a privately owned company, the family that owned that company were principles in the lower 3 holding companies and the corporate station entity itself. It was so intertwined with trusts, and ownership groups (same people, just different titles in each company) and private holdings that from an accounting viewpoint…they could basically bury the profits to the point they essentially paid no taxes. Did they bleed the local station dry? Yup…by the time an advertising dollar made it to the top broadcaster…it was a dime. By the time a dollar investment made it to the bottom…it was written off 4 or 5 times. I didn't understand a lot of the intricacies (sp?)…but the overall point was quite clear….having a money losing company can generate more top level after-tax dollars than the dollars lost at the low level entity. In other words…the owners got more money in their pockets in the end. Don