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Peretti's responsibilities were changing truck leases and
insurance forms to reflect the name of the new employers.
Post-1983 Transactions of MIT 83
MIT 83 closed its bank accounts early in 1984.
Machise owed MIT 83 a compensation fee of 115 percent of the
payroll costs. However, under the terms of the employee leasing
agreement, this payment could be deferred until July 1, 1994, for
a 10-percent-per-year late charge. The MIT 83 agreement differed
from the MIT 82 agreement in a minor respect: Machise had no
obligation to make any payment whatsoever to MIT 82 for 10 years;
however, Machise was obligated to pay interest annually to MIT 83
on the unpaid compensation fee.
On July 1, 1984, MIT 83 billed Machise for 115 percent of
the payroll costs. In 1984, 1985, and 1986, Machise made annual
payments of $519,960 as deferred payment of the compensation fee
plus interest (the 10-percent late charge). After July 1, 1986,
the payments were made by MPC. No cash changed hands in these
transactions. All the payments consisted of the issuance of non-
interest-bearing notes by Machise, and were recorded by journal
entries. The purported payments were recorded as passing through
MIT 83, coming in as compensation fee income, and exiting as
capital distributions to its partners.
The payments to MIT 83 then passed through the partners,
going from them as payments on their notes to Qulart. The
payments then passed from Qulart to Machise as payment on
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