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Georgiou's name in return for Georgiou's capital contribution.
JAI, as Georgiou's nominee, used the funds to purchase the Petite
assets from the bankruptcy trustee for $1,250,000. As part of
the sale, Georgiou was required to guarantee personally eight of
the Petite retail leases that JAI purchased. The value of the
eight leases with the guarantees was approximately $5.9 million.
Georgiou's liability under the guarantee continued whether the
leases were extended, modified, altered, or assigned and
irrespective of any bankruptcy, reorganization, or insolvency of
JAI.
GRS and JAI were administered identically from their
inception. Both purchased their merchandise wholesale from
Kolonaki, and they shared management personnel. Georgiou
micromanaged the operations of Kolonaki, GRS, and JAI. All
decisions, from clothing design to personnel, required his final
approval.
In 1989, JAI, in addition to GRS, was being considered for a
public offering. Ernst and Young was retained to perform certain
financial audits and prepare tax returns. Ernst and Young
prepared tax returns for GRS and JAI for the year ended
September 30, 1989. The GRS and JAI returns were prepared as
separate returns for submission to the Internal Revenue Service
(IRS). GRS and JAI each filed a separate 1989 return. The JAI
return listed Georgiou as the sole stockholder. GRS was wholly
owned by Kolonaki.
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Last modified: May 25, 2011