American Underwriters, Inc. - Page 8

                                        - 8 -                                         
               In addition to the advances mentioned above, petitioner                
          transferred money to Kenilworth or to other parties (e.g., Bear             
          Stearns and Prudential Bache) on Kenilworth's behalf.  Petitioner           
          treated these transfers similarly to the advances above.  These             
          transfers were contemporaneously recorded in petitioner's books             
          as "loans", and petitioner intended at the time of each transfer            
          that the transfers would be repaid by Kenilworth.  Both                     
          petitioner and Kenilworth treated these transfers as demand                 
          loans, and Kenilworth regularly repaid all of these transfers               
          within 90 days of the transfer.  Prior to the Crash, petitioner             
          received timely repayment of all of its debts that were due from            
          Kenilworth. (Hereinafter, we collectively refer to the transfers            
          and advances as advances.)                                                  
               Kenilworth owed petitioner over $18 million in advances as             
          of the last day of Kenilworth's 1987 taxable year.  Petitioner              
          had advanced Kenilworth approximately $15 million of this sum to            
          support the cross-collateral and guarantee agreements.                      
          Petitioner's board of directors (Board), following its evaluation           
          of the receivable from Kenilworth in consultation with advisers             
          (including petitioner's independent accountant (C.P.A.), a                  
          certified public accountant who was extremely familiar with the             
          business and operation of petitioner, of Kenilworth, and of the             
          other related entities), unanimously agreed at a duly held board            








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