Harbor Bancorp & Subsidiaries - Page 62

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          better assurance that they would receive interest and principal             
          payments, as originally scheduled, through the security of the              
          GIC's.  Even if such had been the case, the security so created             
          must be at the price of the loss of the tax exemption for the               
          interest on the bonds.                                                      
                                        III.                                          
               Although I accept the stipulations of the parties and the              
          findings of the trier of fact, as adopted by the majority in the            
          case at hand, I'm impelled to raise a question that may be                  
          germane to other pending cases.  If the failures in other cases             
          of the purported government issuers to supervise the receipt and            
          disposition of bond proceeds were as egregious as they were in              
          the case at hand, the question that may arise in such other cases           
          is whether the bonds were ever issued or validly issued by the              
          local governments or authorities.                                           
               In the case at hand, it might well have been concluded that            
          the Riverside Housing Authority was so out of the loop that,                
          under step transaction principles, the bond holders were the                
          recipients of nothing more than the obligations of Crown Life               
          Insurance Co. or of undivided interests in the GIC's--taxable               
          obligations of a private issuer--that were purchased with the               
          bond proceeds for their benefit.  The Housing Authority was so              
          lax in failing to see to it that the proceeds were used for the             
          intended purpose as to raise the question whether the Housing               
          Authority actually had any such purpose, thereby calling into               




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