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interest, which belonged to petitioner, was accumulated in the
accounts. Although Associated is not required to give petitioner
notice of any draw on the BUF accounts, petitioner typically
received quarterly or semiannual reports and periodically
inquired about the status of his accounts.
Only Associated, and not petitioner or California, had the
right to withdraw funds from the BUF accounts maintained for
petitioner. Although Associated had the right to draw on the BUF
accounts, those funds could be used only to satisfy petitioner's
obligation to indemnify it, and so its control of the funds'
disposition was very restricted. When Associated became liable
for a bond forfeiture, it could, but was not required to, draw
from a BUF account to pay its obligation to California. Pursuant
to the agreement, Associated could forgo indemnity from the BUF
account. When a loss occurred, Associated would customarily ask
petitioner whether he wanted it to be paid from one of the BUF
accounts or from other sources. If petitioner elected to pay the
loss from other sources, the BUF account would not be drawn upon,
and petitioner would reimburse the surety directly.
Historically, petitioner has had a very low rate of payments for
forfeitures made from his BUF accounts. During 1988, Associated
drew only the amount of $4,633.35 from the BUF accounts
maintained for petitioner to satisfy any of petitioner's
liabilities pursuant to the agreement. Petitioner paid all of
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