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not paid by GSC, by petitioner, or by Gomez. As explained below,
the total principal of all managed account funds that was not
repaid by GSC, by petitioner, or by Gomez, was repaid to the
investors pursuant to the Securities Investor Protection Act of
1970 (SIPA), Federal legislation that protects investor funds
when security brokerage companies are liquidated.
Petitioner and Gomez apparently maintained records relating
to the managed account funds. GSC’s internal accounting office,
however, did not maintain records of the managed account funds,
and GSC’s general sales force apparently did not market or sell
managed account investments and apparently did not know of the
existence of the managed accounts.
The evidence in the record does not reflect the exact amount
of managed account funds that were received from investors. The
following schedule reflects Gomez’ estimate of total managed
account funds that petitioner and Gomez received on behalf of GSC
for the years in issue.
Gomez’ Estimate of
Total Managed Account
Year Funds Received
1984 $500,000 to 600,000
1985 500,000 to 600,000
1987 200,000 to 300,000
Some managed account funds received from investors were
deposited into GSC’s corporate bank accounts for use in
purchasing Government-backed securities that GSC, in turn, would
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