Anna Ruth French - Page 5

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          failed to keep complete and accurate records regarding the rental           
               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.             

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