Hacker News Reader

Comment by bagacrap | Hacker News Reader

Perhaps naive, but how is this different from spending investors' money on traditional or viral advertising? Seems like either way they are spending money to create demand. Is the only difference how it shows up in accounting? I wouldn't feel too bad for their business partners---Safeway was still making a profit, presumably, just as an advertising company instead of a retailer.

View on HN

One salient detail that's a bit difficult to pick out of the article: Hampton Creek gave cash to contractors with instructions to use that cash to purchase Just Mayo. However, they recorded (some of?) these cash payments as wages on those contractor's 1099s, meaning those contractors had to pay taxes on that "income" when in truth this was (at best) a business expense.

What I don't get is why the contractors didn't just claim the expense on their taxes to striaghten it out?

Because their expenses would have to total at least 2% of their AGI in order for them to deduct them.

This means someone making $50K would need to buy $1000 worth of Just Mayo or other qualifying unreimbursed expenses.

My comment is based on the single report substantiating the larger story in the article. I think you ask a reasonable question. Maybe the particular contractor had an axe to grind. Maybe the bookkeeping was a mess but for reasons of incompetence rather than fraud.

I think the larger picture is troubling, but I can also see a scenario where each of the pieces that builds up to that case has a plausible and benign explanation. I don't think there are enough details in this article to conclude one way or the other.

It's totally different. It wasn't disclosed to investors and distorted the results in their favor. It probably violated vendor agreements. They purposely cut the paper trail to hide it because they knew it was sketchy.

It reminds me most of print newspapers "circulating" more copies of its paper than actually needed by readers, so that they can charge a higher price per ad towards their advertisers.

How does buying your own products create demand?

> How does buying your own products create demand?

Buying your own products at retail can create demand for retailers to buy it at wholesale if it is on the edge of viability considering non-shill purchases only, because it can make the difference between the total sales at retail being enough for the store to stock the product at all (where, then, they will buy enough to cover both shill and non-shill purchases) and them not stocking it at all (in which case they'll be buying none of it.)

Reply on news.ycombinator.com