Show me the difference between stupid and illegal and I will have my wife’s brother arrested
The Big Short
The Elephant in the Room
Postcard from below the Edge
There had to be staff meetings, board meetings, and at least an opinion of counsel or two to approve a $10 million investment for forty percent of a joint venture in a country that requires seventy-seven licenses to maintain, repair, manufacture, or produce anything. The investor was publicly listed and subject to statutes that would bring glee to a proctologist.
The diligence checklist must have revealed that the partner, the son of a former government minister and sitting politician, had as much experience in the proposed business as, say, any thirty-year-old member of the born right crowd might in mid revel on the other side of an inspired midnight.
In government the politician sold landing rights to foreign carriers out of the back of a hatchback in the glimmer of a dawn that witnessed a quadrupling of civil aircraft, one hundred to four hundred, at the expense of the national carrier while building a real estate empire with money sourced from the Interpol red corner list.
The Native land was conveniently located where the politician and Big Air executive responsible for the aircraft delivery schedule had been classmates in knickers. The land was a one hundred million dollar aspiration past of Big Air where villagers hold vigil in the isthmus that connected the landing strip to the hangars, a terrestrial land bridge that could never be built over their ancestral rights without consent. Aircraft could land but not taxi to the hangars held hostage by centuries of feudal rights. An oversight, a poor reading of the law, or a shakedown.
It was a commercial blessing of sorts. The now four hundred aircraft in the country would continue to be serviced outside the country because of the Isthmus, the seventy-seven touchpoints, and regulations that resulted in a business model of $60 in revenue for every $100 in expenses no matter the manner of the math, a commercial abyss.
Airlines the world over operate 25,000 planes, eight hours a day, 2800 hours a year, and spend $70 billion a year in maintenance costs. And precisely none of that maintenance happens in the land of the Natives.
Fleece
The quicksand of the Native isthmus made perfect sense for a $10 million investment for forty percent in the joint venture with the son of the politician who was under investigation for the deeds of his tenure as the Civil Aviation Minister. The investment carried with it a responsibility to guarantee debt for its share of the joint venture which amounted to $16 million of the $40 million borrowed.
That the duly filed Native corporate reports revealed what can only be described as fleecing of the lamb, the joint venture partner receiving payouts for its beneficence and not its commercial prowess because commerce was suspended on the Isthmus. The payouts were not from the cash that was not flowing through the business model but from the generosity of the Investor and the guarantee of a liability fermenting with the principal growing at a rate of the payout plus the vig.
Inconveniently the Chairman of the Bank that made the loan that the investor guaranteed had his liberty suspended charged with a unique form of underwriting that required the borrower to divert loans proceeds to the Chairman’s families enterprises that were less enterprises than vessels for the artwork that adorned mansions home and abroad. The borrowers unable to obtain credit elsewhere were obliged by the Chairman for a fee that disappeared into the Louvre not the income statement of the Bank he shepherded.
Perpetuity
The tale continues in a business model that sells receivables forward to preserve at best a five percent margin which in the year the joint venture was formed was a fraction of the investment and guarantee.
That the joint venture is a Native joint venture ensures that an exit will not be a by your leave and thanks for the pastries because in the infinite wisdom of the staff meetings the CEO of the investor was appointed as a Director of the Native company subject to the unlimited liability of folly of a clinical trial patient in the continuing effort to determine the difference between stupid and illegal.
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