The DNC loan

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The DNC loan

Postby kiryan » Mon Mar 14, 2011 4:51 pm

There is a 100k contribution limit but this company is coming out and making or guaranteeing a 10 million dollar loan to the DNC. I haven’t seen anything like this for a while, but it has precedence in business. I think it was Netscape who was the beneficiary of millions of dollars in phantom orders from a number of tech firms in order to fund its legal fight with Microsoft.

What they do is they book an order, the company gets the cash (or takes a loan against the revenues) and at some later point, the orders are cancelled. It’s like a short term no interest loan… except when the company goes bankrupt.

So… lets assume the 10 million loan to the DNC is legal to begin with. What if the DNC goes bankrupt… then it had the practical effect of a contribution… What if the DNC takes the loan and intentionally defaults on just this one loan and we find out later that the terms of default were very advantageous to the DNC or the repayment terms were ridiculous… Do we count it as a contribution at this point?

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