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Zerbini to represent Zeve in the criminal case. This is contrary
to petitioner’s representations as to the facts, as made in
petitioner’s amended trial memorandum. Petitioner did not make
any of the determinations that its articles of incorporation
require, in considerable procedural and substantive detail (see
supra in the Findings of Fact), before petitioner may indemnify
or agree to indemnify Zeve for the criminal case expenses.
Petitioner represented in the amended trial memorandum that
Zerbini would testify that petitioner’s $3,000 payment
“represented legal fees for his representation of Petitioner
only.” Petitioner did not call Zerbini as a witness. In light
of the fact that petitioner created the uncertainty in the record
herein as to whether it had paid Zerbini in part to represent
Zeve in the criminal proceeding, it should have been obvious that
it was important to clarify the matter. Petitioner seemed to
recognize this by listing Zerbini in the amended trial memorandum
and describing Zerbini’s expected testimony on this point. In
the final analysis, petitioner chose not to call Zerbini, and he
did not testify. We are entitled to, and we do, infer that if
Zerbini had testified, then his testimony would have been
unfavorable to petitioner on this issue. O’Dwyer v.
Commissioner, 266 F.2d 575, 584 (4th Cir. 1959), affg. 28 T.C.
698, 703 (1957); Stoumen v. Commissioner, 208 F.2d 903, 907 (3d
Cir. 1953), affg. a Memorandum Opinion of this Court dated March
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