Hypothetically speaking...

Don Earl was a well$-$respected, experienced CPA. After $10$ years at a national accounting firm, he was hired by Breeze, Inc., a multinational corporation headquartered in the United States. He worked his way up and eventually took over as the Chief Financial Officer. As the internet began to explode, Breeze decided to pivot the business to e$-$commerce. Two years later, e$-$commece slowed, and Breeze was in dire need of cash to continue operations. Management turned to the accounting department.

Breeze needed to borrow a significant amount of money but could not afford to increase the amount of liabilities on the balance sheet because of the stock market reaction and bank ability to call for the repayment of existing loans. Don found a way to raise cash without reporting a long$-$term note payable on the balance sheet. Under an obscure rule, companies could set up a separate legal organization that would not be reported on the parent company financial statement if a third party contributed at least $3\%$ of start$-$up capital. Don called a friend, Carson Hunt and asked him to participate in the business venture with Breeze. Carson agreed in return for a substantial amount of valuable Breeze stock and CarsonCo was formed. Carson went to the bank and used the Breeze stock a collateral to borrow a large amount of money for CarsonCo. Then Breeze sold some poor$/$under performing assets to to CarsonCo in exchange for the cash that CarsonCo borrowed.

In the end, Breeze got ride of bad assets, received the proceeds of the long$-$term note payable, and did not have to show the liability of the balance sheet. Only the top executives and the accountants that worked closely with Don knew the scheme, and they planned to use this method only until the e$-$commerce portion of Breeze became profitable again.

How did Don's scheme affect the overall appearance of Global's financial statements? Which specific accounts were involved and how? Why was this important to investors and creditors?