Cleo Perfume, Inc. - Page 7

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          petitioner's stockholders, dated July 15, 1991, confirming that the         
          obligation had been assumed by petitioner's stockholders and that           
          the comptroller had been authorized to write off the debt.                  
               On August 15, 1991, VIG also sent a letter to ASA requesting           
          confirmation that petitioner was not indebted to ASA.  On September         
          13, 1991, ASA confirmed that petitioner had an outstanding balance          
          of zero as of June 30, 1991.                                                
          Destruction of Remaining ASA Merchandise                                    
               Sometime in 1993, Martha Balzac (vice president of ASA and Mr.         
          Balzac's wife) visited petitioner's offices and informed Mr.                
          Campos, Sr., that he could destroy the remaining unsold ASA                 
          consignment merchandise.  Accordingly, in 1995,3 CPI destroyed all          
          of the remaining approximately $1.8 million of ASA merchandise.  On         
          its computer-generated June 30, 1991, inventory listing, petitioner         
          identified the discarded merchandise by highlighting the                    
          merchandise in yellow.                                                      
          New Accounting Firm                                                         

                    Corporation, was duly authorized to take all                      
                    actions required to implement the related                         

               3    The record is unclear as to why petitioner waited 2               
          years to destroy the unsold ASA merchandise.                                

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