Zahirudeen Premji and Carol M. Premji - Page 3

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               Unless otherwise stated, all section references herein are             
          to the Internal Revenue Code in effect for 1990, and all rule               
          references are to the Tax Court Rules of Practice and Procedure.            
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts, supplemental stipulation of facts, and            
          attached exhibits are incorporated herein by this reference.                
               At the time they filed their petitions in these cases,                 
          Zahirudeen Premji (Mr. Premji), and Carol M. Premji, and Carl               
          John Norby (Mr. Norby), resided in Boulder, Colorado.                       
               Mr. Premji and Mr. Norby invested funds in M&L Business                
          Machine Company, Inc. (M&L).                                                
          M&L Business Machine Company, Inc.                                          
               M&L was a closely held Colorado corporation formed in the              
          1970's to repair office machines and business equipment.  During            
          the 1980's, Robert Joseph, Daniel Hatch, and David Parrish                  
          acquired all of M&L's stock.  Thereafter, M&L was used to operate           
          a ponzi scheme.1  M&L also continued to repair office machines              
          and business equipment, but that activity generated little                  
          income.                                                                     
               The M&L ponzi scheme collected funds from investors.  In               
          return, M&L promised investors exceptionally high interest rates.           


          1  The first ponzi scheme surfaced in 1920, instigated by                   
          Charles Ponzi.  It is the subject of Cunningham v. Brown, 265               
          U.S. 1 (1924).                                                              




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