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inventory of used coaches that had been taken in as trades. Used
coach sales also declined, and Northwest suffered cash-flow
problems from the cost to inventory the used coaches.
As the problems mounted, Northwest used the proceeds from
the sales of coaches to pay the most pressing operating expenses
or floorplan costs rather than floorplan loans, thus rendering
itself "out of trust". Nicholson admittedly "robbed Peter to pay
Paul". In April 1988, checks from Northwest payable to
petitioner were rejected by the bank due to insufficient funds;
however, Northwest did eventually pay the checks that were
rejected. Franklin began contacting Nicholson on a regular basis
about Northwest's accounts payable to petitioner. Nicholson
pacified Franklin by telling him whatever was needed "to keep
things going" so that Northwest could find a way to pull out of
the slump. Northwest had a deficit equity of $105,434 on April
30, 1987, which increased to $469,176 on June 30, 1988. Prior to
October 1988, Northwest's officers included Nicholson as
president, Moore as vice president, Weaver as treasurer, and Mrs.
Fore as secretary; while Nicholson, Mr. Fore, Moore, and Franklin
served on the board of directors. From the time petitioner
purchased Fishfader's stock in Northwest through the fall of
1988, Nicholson managed Northwest, and petitioner exerted no
control over Northwest and did not dictate Northwest's policy.
By late September or early October 1988, Nicholson had
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