Reading through a summary of the Enron Scandal, one of the mentioned "ventures" that Enron took, was a joint venture with Blockbuster to provide online movie rentals. In secret however, Enron had set up a loan with a Canadian bank in the amount of $115 million, in exchange for 10 years of profit gained from the Blockbuster venture.

My question is, is this legal? It seems like the burden of debt was on the bank, and that if Enron was able to convince the bank to trade profits from the venture in return for upfront cash, then it's not Enron's fault if the profits weren't what the bank wanted. To be clear, I am not asking for legal advice, I am asking if what Enron did was legal in this case.

  • 2
    Contracts are contracts. If everyone had consideration in the contract why wouldn't it be legal? It's not like Enron promised the Canadian bank a pile of heroin... Separately, you don't know if there was a breach clause related to paying over less than 10 years or some other out related to insolvency.
    – quid
    Jul 6 '16 at 18:11
  • Could you provide any suggestion of why you think it might not be legal?
    – feetwet
    Jul 6 '16 at 20:54

Yes, selling future profits is legal. Most financial securities and contracts, including most stock, are essentially an exchange of present capital for some claim on future capital. (The "future capital" can be anything from simple shares of a venture to specific payments structured based on all sorts of terms and conditions.)

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.