- 5 -
failed to keep complete and accurate records regarding the rental
deposits.
Sometime prior to 1989, AHC began experiencing financial
distress. In June 1988, AHC’s controller quit because of the
company’s deteriorating financial condition. AHC hired a new
controller, but this replacement quit 3 months later for similar
reasons. Shortly thereafter, AHC sought the services of an
accounting firm to evaluate its corporate records for taxable
year 1988. The accounting firm determined that AHC’s corporate
records were in poor condition and many required reconstruction.
In December 1988, AHC filed a chapter 11 bankruptcy
petition. The petition was subsequently converted to a chapter 7
petition. During the pendency of the bankruptcy proceedings, a
creditors committee filed suit against AHC alleging improper
transfers and fraudulent conveyances. The creditors committee
hired Piper & Marbury, a law firm, to represent it in the
bankruptcy proceedings. Piper & Marbury hired the accounting
firm of Ernst & Young to evaluate AHC’s financial records. In
January 1989, before the process of reconstructing AHC’s
financial records for 1988 had been completed, the creditors
committee obtained possession of such records. Sometime after
October 1989, the creditors committee returned the records to
AHC. Upon receipt of the records, AHC discovered that some
records were missing. Consequently, neither petitioner nor Mr.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011