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partnership interests. This reallocation of losses created the
substantial deficit balance in THEI's capital account with IHCL.
Marriott Corp.
In October 1987, the Marriott Corp. became a partner in PLH
and PGL. It contributed cash and made loan guaranties to those
partnerships in exchange for a 5-percent general partnership
interest in each. Marriott also received an allocation of 95
percent of net losses from PLH and, initially, 99 percent of net
losses from PGL. These allocations reduced the losses previously
allocated to IHCL. The allocation of income, however, remained
unchanged.
With regard to IHCL, 99 percent of that partnership's income
continued to be allocated to Dondi. At the end of 1987, THEI had
a total deficit in its capital account of $5,010,171, while Dondi
had a positive capital account of $7,763,183, as a result of these
reallocations. At the beginning of 1991, the capital accounts of
IHCL indicated a negative capital account totaling $5,920,614 for
THEI and a positive capital account of $14,879,392 for Dondi.
Transfer to FDIC and Mr. Manchester
On June 20, 1991, pursuant to ongoing settlement negotiations,
Dondi transferred its 15-percent limited partnership interest in
IHCL to the Federal Deposit Insurance Corporation (FDIC), as
receiver for Vernon. FDIC then transferred this interest in IHCL to
Mr. Manchester in exchange for his $5 million payment. A first
amendment to the IHCL Restated Agreement, dated June 20, 1991,
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