Verl W. and Frances M. Haderlie - Page 3

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               Through a colleague, petitioner learned about Daniel Schwab            
          (Schwab), an insurance agent who was offering $1,250,000 of life            
          insurance for a "minimum premium".  After advising the colleague            
          of his interest, petitioner received a telephone call from                  
          Schwab.  Schwab confirmed that he was offering $1,250,000 of life           
          insurance for a "minimum premium" and that petitioner would need            
          a physical exam, paid for by Schwab, and after 1 year, petitioner           
          could either extend or cancel the policy.  At the time of the               
          conversation with Schwab, petitioner already owned a whole life             
          insurance policy with coverage in the range of $100,000 to                  
          $150,000.  At the same time, petitioner believed that his need              
          for life insurance coverage was in the $300,000 to $500,000                 
               Thereafter, petitioner met with Schwab, who promoted a                 
          $1,250,000 policy with Royal Maccabees Life Insurance Co.                   
          (Royal), and petitioner agreed to apply for a policy.  Schwab               
          then accompanied petitioner to a medical center where a physical            
          exam was administered to petitioner.  Petitioner, during 1991,              
          remitted separate checks in the amounts of $3,500 and $40,653               
          made payable to Stable Reserve, Inc. (Stable Reserve), and Royal,           
          respectively.  Stable Reserve was Schwab's straw entity used as a           
          conduit for the insurance scheme.  At the same time, Schwab                 
          remitted a $40,653 check to petitioner.  In 1992, Schwab remitted           
          a $3,500 check to petitioner.  Schwab's $40,653 check to                    

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