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Continent corporations were to be repaid a total of $180,000,
which Roy and petitioner had received as reimbursements of
preincorporation expenses.
During a June 1, 1984, meeting, Home was advised by
petitioner that petitioner and Roy had purchased Riley and they
had given their interests in Riley to the Mid-Continent
corporations to repay a portion of the reimbursement of
preincorporation expenses that had been paid to petitioner and
Roy in earlier years. Petitioner and Roy were not on good terms
and had an acrimonious relationship. In a June 11, 1984, letter,
investors of the Mid-Continent corporations were advised that
Riley had been purchased. Roy advised policyholders of his
company (American Planning Associates, Inc.) that his company had
purchased Riley. Petitioner, who was president of International
Financial Consultants, Inc. (International), by a January 16,
1985, letter to his policyholders, advised that International had
purchased Riley.
Riley had about 4,000 active and inactive client files, and
the clients' identities were essential to its business. The
clients of Riley, an Indiana insurance agency, were split between
Roy (A through K) and petitioner (L through Z). Petitioner
advised Home that he purchased the interest in Riley during
November 1983 and sold it to the Mid-Continent corporations
during December 1983. Petitioner, on his 1983 income tax return,
reported that he purchased Riley during November 1983 for $67,500
and that he sold it during December 1983 for $90,000. Home
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