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Fraud Will Always Be The Issue

08 July 2015 by lberuti

As long as fraud is a possibility, there will be some asymmetry when you get exposure to the credit of a company. If Parmalat is the poster child for such situation, we keep having examples of companies getting punished after revelations are made of suspicious behaviour. We have heard of a few accounting issues over the last year for instance, but the most recent example is ISOLUX. Its 5 year risk premium went a good deal wider yesterday when a Spanish judge rejected a request to stop investigating the company chairman as part of a corruption probe. The question has been lingering since last year and ISOLUX said “the company is not part of the investigation so we don’t really see this as an issue that could affect the business performance”, but the current atmosphere is not for leniency and investors do not give easily the benefit of the doubt at present.