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B. W&H’s Advances of the Initial Capital to
Conduct the Direct Mail Fundraising Campaign
As indicated above, the Contract was a “no-risk” contract
with respect to petitioner’s payment of fundraising expenses.
For the first 2 years or so under the Contract, W&H advanced
money to the Escrow Account to pay for postage. Postage was an
“upfront” expense, while other expenses generally were billed
“after the fact”, when petitioner had already received the
revenue generated by the mailing. For a while, W&H continued to
advance money to pay for postage even when there were substantial
amounts in the Escrow Account. W&H did this because its people
believed that there was not enough money in the Escrow Account to
pay both the postage and the other vendors, and because of the
draws that W&H paid to petitioner.
W&H’s last advance of funds to petitioner for postage
occurred on March 9, 1987. Thereafter, petitioner earned
sufficient profits from its mailings to cover its postage
expense.
The Contract does not specify how much capital W&H would
provide to fund petitioner’s direct mail fundraising campaign.
W&H’s decisions to advance additional capital were based, in
substantial part, on its evaluation of the results from the
mailings that had already been done and on its conclusions about
the mailing campaign’s profits prospects. Where W&H and its
clients entered into no-risk fundraising contracts similar to the
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