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& H construction projects, during 1989 and 1990, petitioner
submitted draw requests to Washington Federal for a portion of
those loan proceeds in order to pay the costs incurred by K & H
in constructing Ms. Velilla's house, and Washington Federal
complied with those requests either by transferring the loan
proceeds sought to petitioners' account at its Hillsboro branch
or by issuing a check to K & H for those proceeds.
During 1990, K & H encountered financial difficulties, did
not have sufficient funds to meet its outstanding obligations,
and was unable to obtain funds from its construction loan ac-
counts because various construction projects were stalled. As of
the spring of 1990, petitioner ceased being actively involved in
the operations of K & H and ceased carrying out the responsibili-
ties that he had undertaken in connection with those operations.
K & H completely terminated its business operations sometime
during 1991.
Deposits into and Disbursements
From Petitioners' Accounts
During the Years at Issue
During 1989, petitioners maintained accounts at the Hills-
boro branch of Washington Federal, Far West Federal Bank (Far
West Federal), and Benjamin Franklin Federal Savings and Loan
Association (Benjamin Franklin Federal). During 1990, in addi-
tion to those accounts, petitioners maintained accounts at Bank
of America and West One Bank and three additional accounts at
Benjamin Franklin Federal. During the years at issue, petition-
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