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In 1987, petitioner hired and paid an attorney $108,037 in
legal fees to represent him in GSC's liquidation proceeding and
against the claim for damages.
On March 22, 1988, in GSC's liquidation proceeding,
petitioner and Gomez signed consent judgments agreeing to pay
$573,750 and $701,250 in damages, with interest, respectively, to
the SIPC trustee for repayment to managed account investors.
The evidence in this case does not reflect how much, if any,
of the above damages were actually paid by petitioner and Gomez.
As indicated, however, the SIPC trustee did repay the principal
amount of the managed account funds owed to 26 of the managed
account investors.
Use of Managed Account Funds Deposited
into Bank Accounts in Petitioner’s Name
From 1984 through 1987, with funds deposited into bank
accounts in his name, including managed account funds, petitioner
paid certain GSC business expenses. For example, in 1984, GSC
entered into certain investment hedge transactions to offset
risks associated with GSC’s purchase and subsequent holding of
mortgage-backed securities for sale to GSC customers. Petitioner
made all decisions relating to hedge transactions entered into on
behalf of GSC, and petitioner purchased securities with funds
withdrawn from the bank accounts in his name for the above
purpose of hedging GSC’s investment risks.
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