finance commerce
Is selling profits (a la Enron) legal?
<p>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.</p>

<p>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. <strong>To be clear, I am not asking for legal advice, I am asking if what Enron did was legal in this case.</strong> </p>

<p>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.)</p>
