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transactions in which ACM engaged are collectively referred to as
the contingent installment sale transaction (CINS transaction).
The design of the CINS transaction appears to have
originated in discussions in early 1989 between Macauley Taylor
(Taylor), a managing director of Merrill's Swap Group, and
James Fields (Fields), a member of his staff. From the spring of
1989 through the summer of 1990, the Swap Group and Merrill's
investment bankers promoted the idea among Merrill's clients.
Colgate-Palmolive Co. (Colgate) was one of Merrill's clients
that Taylor and his staff approached. Colgate's treasury
department regularly consulted Henry Yordan (Yordan), a managing
director in Merrill's Capital Markets Group, concerning
developments in the debt markets. Yordan was aware that Colgate
had reported a sizeable capital gain (approximately $105 million)
for its 1988 taxable year on its sale of the Kendall Co.
(Kendall), and that Colgate might be receptive to the CINS
transaction. Through Yordan's introduction, a meeting was held
on May 15, 1989, at which Taylor and his staff described the CINS
transaction to Colgate's assistant treasurer, Hans Pohlschroeder
(Pohlschroeder). Merrill's representatives stated that, apart
from the few elements that were essential to secure the desired
tax consequences, the partnership structure could be adapted to
suit a variety of investment objectives.
Colgate's initial reaction to the proposal was skeptical.
Pohlschroeder explained that Colgate did not have the required
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