National Industrial Investors, Inc. - Page 8

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            Owens Loan when it refinanced the property on March 4, 1988.  At                           
            that time, the principal balance of the loan was $86,181.50.                               
                  Petitioner issued another obligation against the property in                         
            1988 to settle a shareholder derivative suit (the McMahon                                  
            Litigation).  On August 17, 1984, McMahon, a minority                                      
            shareholder, instituted a suit against petitioner, all other                               
            shareholders, and Byrne.  McMahon alleged, among other things,                             
            that Byrne unilaterally appointed his own family as officers and                           
            directors, that the Byrne family caused NII to purchase three                              
            subsidiary corporations without informing McMahon, that the                                
            family diverted money from petitioner to the subsidiaries for the                          
            purpose of paying salaries and stipends to the family, and that                            
            the family's behavior generally constituted self-dealing and                               
            breach of fiduciary duty.  The parties pursued the litigation                              
            from August 1984 through March 1988.                                                       
                  The litigation essentially ended on October 29, 1987, when                           
            Judge Thomas Smith imposed sanctions after several attempts by                             
            McMahon's lawyer, Jones, to enjoin the corporation from carrying                           
            on its business.  Judge Smith explained the sanctions, stating:                            
                        It appears to the court that your conduct and your                             
                  client's conduct in this case, Mr. Jones, is reprehensible,                          
                  to say the least.                                                                    
                                    *     *     *     *     *     *     *                              
                        There is no factual basis; there is no legal basis for                         
                  your continuing to proceed in this case.  What you're doing                          
                  is, quite simply, harassing the other side and I'm tired of                          
                  it, and if you won't stop doing it on your own account, then                         

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