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Mr. Welker, who had a high school education, prepared
petitioners' tax returns for each of the years in issue.1
Mr. Welker worked at Miller-Senate Finance Co. (Miller-
Senate) as the office manager/loan officer. As such, he ran the
day-to-day operations of Miller-Senate. His duties included:
(1) Approval of vehicle loans; (2) preparation of documents
relating to such loans; (3) arrangement of credit lines; and (4)
collection and repossession activities.
Virtually all of the loans Mr. Welker approved on behalf of
Miller-Senate were loans for cars purchased from Bob Brockland
Pontiac-GMC (Brockland Pontiac). Brockland Pontiac utilized
Miller-Senate for the financing of new and used cars sold to high
risk customers.2 Miller-Senate obtained these high risk loans
(the high risk loans) by purchasing chattel mortgage contracts
from Brockland Pontiac. Miller-Senate lost approximately
$300,000 on these loans.
Mr. Welker and Brockland Pontiac had an arrangement whereby
Brockland Pontiac made payments to Mr. Welker in the amount of
$100 in cash for each high risk loan Mr. Welker purchased on
1 Unless otherwise indicated, all descriptions refer to the
1984, 1985, 1986, and 1987 tax years.
2 High risk customers were those who could not qualify for
conventional financing through banks and dealer financing.
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Last modified: May 25, 2011