- 20 -                                                 
            expert, as an adviser.  Dr. Haaland's primary responsibility was                          
            to devise a more profitable business plan for Flying H.                                   
                  At the time of acquiring Flying H, petitioner believed that                         
            he would be able to put together a profitable cattle operation                            
            through better management of the land.  When petitioner acquired                          
            Flying H, his initial herd of cattle was 20 head of longhorn.                             
            Later, when petitioner and his advisers realized that the                                 
            longhorn were not profitable, they decided not to expand that                             
            aspect of the ranching operation.  To cut losses, they put the                            
            longhorn to work as lead cattle.                                                          
                  During 1986 and 1987, Flying H continued to run cattle under                        
            rate-of-gain contracts, as it had done under previous owners.                             
            Under rate-of-gain contracts, the ranch does not buy cows or                              
            calves; rather, it allows the calves of others to graze on the                            
            ranch for a fee computed on the basis of how much weight the                              
            calves gain.  These contracts were less profitable than                                   
            petitioner had expected and resulted in overgrazing.                                      
                  In 1987, petitioner employed Dr. Haaland to analyze the                             
            ranch operations in an effort to improve its profitability.                               
            After examining the ranch, Dr. Haaland found that the pastures                            
            had been overgrazed and that the facilities were in disrepair.                            
            Dr. Halland's initial plan for Flying H was to reduce grazing and                         
            rebuild the ranch's infrastructure, such as the fences,                                   
            buildings, and irrigation systems.  In order to let the pastures                          
            recover, grazing had to be limited for a short while.  With this                          
Page:  Previous   10   11   12   13   14   15   16   17   18   19   20   21   22   23   24   25   26   27   28   29   NextLast modified: May 25, 2011