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Initially, petitioner maintained the Martin family’s
household finances, but after the business growth, Mr. Martin’s
personal business secretary began maintaining the Martin
household and family finances. For example, petitioner
maintained a checking account to pay routine bills for doctors,
groceries, etc., but Mr. Martin’s personal secretary paid, out of
Mr. Martin’s corporate shareholder accounts, a majority of
household bills, such as those concerning the mortgage, credit
cards, installment loan payments, etc.
In 1984, Mr. Martin hired Louis J. Hevey, a certified public
accountant, and he became the chief financial officer for all of
Mr. Martin’s businesses. Mr. Hevey ensured that there was
sufficient cash in the shareholder advance accounts to pay the
Martins’ expenses. Petitioner did not exercise any control or
direction over Mr. Hevey, and she did not review his records or
discuss finances with him. The amount of money used by Mr. Hevey
to cover the Martins’ lifestyle remained relatively constant
during 1984-1991, the period Mr. Hevey worked for Mr. Martin.
During the period under consideration, Life advanced
substantial funds to FSCA. In 1986, the North Carolina Insurance
Department (NCID) regulators became concerned about the financial
stability of Life and the large volume of loans to FSCA, which
the regulators did not consider to be assets for statutory
accounting purposes. Without considering the promissory notes
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