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Why related-party loans at issue in the Mark Walter probe are considered risky
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Set us as preferredThe federal law enforcement probe into the financial affairs of the Dodgers’ controlling owner, Mark Walter, seems to focus on what looks like an obscure financial maneuver: related-party transactions.
There are examples in which related-party transactions led to trouble, including the 2001 bankruptcy of Enron Corp., the largest at the time in Wall Street history.
Here are more details on the risk presented by related-party transactions and why they require disclosure and extra regulatory scrutiny.
The failure of Enron was a prime lesson in how related-party transactions can lead to a company’s downfall.
The debacle was a driving force in the passage of the Sarbanes-Oxley Act of 2002, which tightened regulations over governance, accounting and related-party transactions.