American Underwriters, Inc. - Page 6

                                        - 6 -                                         
          that day.  If the purchaser failed to transfer the requisite                
          funds to the seller within the required period of time, the LPO             
          would cancel and the seller would retain all of the funds that              
          the purchaser had previously paid to purchase it.                           
               Mr. Roven directed the trading activities of petitioner,               
          Kenilworth, and certain other related entities that are not                 
          directly relevant to our decision herein.  Mr. Roven caused                 
          petitioner (or, sometimes, one of the other related entities) to            
          buy the positions in his recommended securities (including                  
          LPO's), and he divided the interests in these positions among the           
          entities in a preset manner.  All purchases of LPO's with the               
          funds of petitioner were contemporaneously recorded as "loans" to           
          Kenilworth and the other related entities to the extent that each           
          entity (including Kenilworth) benefited therefrom.  None of these           
          "loans" (hereinafter referred to as advances) were evidenced by a           
          written agreement (e.g., a note) because Mr. Roven did not                  
          believe that he needed to prepare one, given the fact that he               
          controlled all of the entities and they were commonly owned.  For           
          the same reason, none of the advances were directly secured, and            
          none of the entities paid interest on any of the advances.                  
               Petitioner and Kenilworth considered the advances to be debt           
          that was payable on demand without a set maturity date, and they            
          intended at the time of each advance that it would be repaid                
          shortly after it was made.  Prior to October 19, 1987, Kenilworth           
          regularly repaid each advance shortly after it received the                 




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011