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In July 1984 the subsidiary's accountants discovered that
FF 108,000 (approximately $11,000 - $12,000 at then-current
exchange rates) attributable to cash transactions was missing.
WFGI's officers concluded that the funds had been embezzled by
the subsidiary's resident manager. The money was never
recovered. The manager left the company before the end of the
fiscal year, pursuant to a settlement agreement involving a
mutual release of claims and an additional payment by WFGI of
$22,000.
In July an artist doing business as Selene Ltd. filed suit
against the French subsidiary, seeking payment of $25,500
allegedly due to him as his share of the sale price of two
paintings. Having investigated the financial capacity of the
subsidiary and learned that it was technically insolvent, he
requested a declaration of insolvency and involuntary liquidation
of the company to satisfy his claim.
As the fiscal yearend approached, the officers of WFGI
expected that the results for the year would again show a large
loss. Moreover, despite payments to the parent by the subsidiary
during the years at issue totaling more than $1.5 million, the
intercompany account balance had reached its highest level since
the first year of operation. A special meeting was convened on
September 20, 1984, to consider the possibility of dissolving the
French subsidiary. For reasons that are not clearly articulated
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