- 118 -
transferred $10 million to Gatetown. Gatetown transferred the
money to MDT and MSI. MDT and MSI issued commercial paper to
five entities that were controlled by the Spanish investors,
notwithstanding that the five entities did not contribute any
funds to MDT or MSI. MDT and MSI used the $10 million combined
with promissory notes to pay Manver a total of $10 million cash
and $12.5 million in promissory notes.
To avoid withholding on the interest on the $12.5 million in
notes to Manver, a round of commercial paper was issued. During
March 1988, Manver transferred $9.03 million to Gatetown. The
funds went through a myriad of controlled entities, within a day
or two, and ended with MDT's transferring $7.672 million to
Manver as payment on the royalties. Manver then transferred
$2.672 million to Gatetown, which then transferred the money
through a series of controlled entities, eventually to have
$3.354 million transferred back to Gatetown, which transferred it
to MSI, which in turn transferred it to Manver. Petitioners
effectively used $7.672 million of funds supplied by Manver to
reduce debts to Manver by $11 million.
As subsequent rounds of commercial paper were issued, the
interest payments that were made to the controlled entities were
then distributed to the Spanish investors' Eurotor companies.
The use of the commercial paper not only provided an opportunity
to avoid withholding on the interest, it also provided a method
Page: Previous 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 NextLast modified: May 25, 2011