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Petitioner worked in the Huntington Beach dealership for
approximately 1 year. He then worked for a Honda dealership in
Pasadena, California, for 1 year. As of the time of trial,
petitioner had been working for approximately 2 years with a Ford
dealership in Thousand Oaks, California.
Petitioner's accountant, Jesse Greenspan (Mr. Greenspan) was
not aware that petitioner had personally borrowed $400,000 from
Sanwa Bank. Petitioner's auto dealership's accountant, Judith
Rugh (Ms. Rugh), worked for an accounting firm that provided
services for approximately 30 clients which were auto
dealerships. Ms. Rugh believed that, generally, petitioner's
business maintained a fairly accurate set of books. Ms. Rugh
also believed that petitioner's salary for the 1987 calendar year
was probably low when compared to other auto dealers that she was
familiar with.
On September 22, 1995, respondent's representatives met with
petitioner and his accountant. The meeting lasted approximately
2 hours. Respondent's counsel believed that the purpose of the
meeting was to engage in preparation for trial. Petitioner and
his accountant, Mr. Greenspan, believed that it was a settlement
conference concerning the $400,000 capital contribution claimed
as a stock loss and whether that was a different amount from the
$400,000 bad-debt deduction. Petitioner and Mr. Greenspan
presented numerous documents to prove that there were two
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