- 41 -
Additionally, assuming petitioners relied on counsel to provide
them with advice, petitioners disregarded the advice. With
respect to the advances, Bernard testified:
Q Did you advise Mr. Georgiou at any time with
respect to whether or not he should prepare promissory
notes?
A Yes.
Q Or whether it was a good idea to prepare
promissory notes?
A Yes, of course. Again, as a routine I advise
clients that they must--they should treat their
corporations as separate entities and not just another
side of their trouser pocket, that any time money flows
from the corporation to them it has consequences. And
if it's a loan, it needs to be reflected by a
promissory note. It's always better if it's secured.
And the note must be for a reasonable period of time
and must require payments.
Pryor testified on the consolidated return issue as follows:
Q And how did you know to focus on the issue of
beneficial ownership?
A * * * I looked up in a source we have called
the Bureau of National Affairs, it's a tax service, and
what the criteria is for filing a consolidated return.
I think up to that point [spring 1991] I have been
informed that George was the owner of Judy Alexander
[JAI].
And I think in that meeting, I said, Well, we
cannot file a consolidated return unless we can show
that there's beneficial ownership between Kolonaki and
JAI Alexander. Even though someone is the nominal
owner, if we can show beneficial ownership, then it
would be possible to file a consolidated return.
The evidence is substantial that Georgiou, Pryor, and
Bernard then attempted to "show" beneficial ownership by
fabricating and altering documents. The same strategy was used
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