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at BEI's board of director meetings. Petitioner also lent money
to other individuals and entities at an interest rate generally
of 10 percent. For the most part, the loans originated from
petitioner's acting as a seller-financier of property or
advancing money to purchase a business or real property. In
addition, petitioner occasionally lent money to an employee or
relative.
Prior to 1987, petitioner’s net worth was in excess of $60
million. In 1986, petitioner sold ENSCO stock for an average
price of about $24 per share. At times during 1986, the sale
price received was over $33 per share. The precipitous drop in
the stock market on October 19, 1987, known as "Black Monday",
and management problems at ENSCO caused the ENSCO stock value to
decrease to as low as $6.00 per share. The decreased value of
the ENSCO stock affected petitioner's ability to obtain financing
for BEI because he had used the stock as collateral. As a result
of the stock market crash and management problems, it was
necessary for petitioner to become more involved with ENSCO, and
he had less time to devote to BEI. In 1988, petitioner was
serving as the chairman of ENSCO's board of directors and
received over $300,000 in wages.
From 1986 to 1988, none of the subsidiaries earned a profit,
except for Kaufman Lumber, which was profitable when it was
acquired. In 1988, one of BEI's subsidiaries, PPD&G, filed a
petition for voluntary reorganization under chapter 11 of the
Federal bankruptcy laws. At the time of the bankruptcy petition,
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