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distressed companies and turn them into profitable businesses.
Petitioner believed that he could make the companies successful
because of his past business success. In August 1986, petitioner
formed Bell Equities, Inc. (BEI), a holding company, for this
purpose. From 1986 to 1988, petitioner was the sole shareholder.
During this period, he made capital contributions to the company
of over $424,963. Petitioner made all decisions regarding which
businesses BEI would acquire. During 1986 through 1987, BEI
acquired a number of subsidiaries that were insolvent or
operating at a loss. Petitioner was unable to turn any of the
subsidiaries into profitable businesses. BEI had also acquired
one subsidiary, Kaufman Lumber Co., that was profitable at the
time of acquisition. None of the subsidiaries were sold or even
offered or advertised for sale.
BEI's subsidiaries engaged in a variety of business
activities, including manufacturing, lumber, radio and television
broadcasting, advertising, and theme parks. BEI acquired
majority interests in the following entities:
Subsidiary Date of Acquisition Percentage Ownership
Kaufman Lumber Co. 12/86 50
3/89 50
Monarch Mill and Lumber Co. 8/86 90
* 10
Reelcraft, Inc. 12/86 80
Ainsley Communications, Inc. 4/87 100
The Entertainment and Leisure Corp. 12/86 90
Shotts-Vines, Inc. 6/87 80
PPD&G, Inc. 5/87 100
* Date of acquisition is not available in record.
The Entertainment and Leisure Corp. (TELCOR), a 90-percent
subsidiary of BEI, was also a holding company. TELCOR wholly
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