-4- Between 1978 and 1987, petitioner had gross revenues of $123,124,905 and after-tax net income of $1,705,958. Petitioner's primary source of income in 1985 and 1986 arose from its work on the All American Pipeline project,2 which involved coating, insulating, and wrapping 325 miles of pipeline in Texas, Arizona, and California. In connection with this project, Mr. Leonard personally guaranteed petitioner's $1.5 million debt to the Royal Bank of Canada. The All American Pipeline project was finished in 1987; thereafter petitioner continued to receive payments on the contract but undertook no new business. In February 1987, Mr. Leonard began contemplating retirement. On September 28, 1987, 2 days before the end of petitioner's tax year, petitioner's board of directors (consisting of Mr. Leonard and his son) voted to pay Mr. Leonard a $1.68 million bonus in addition to his $97,800 salary for the year. The board's decision was purportedly based on several considerations, including: (1) Mr. Leonard's efforts in obtaining the All American Pipeline project; (2) Mr. Leonard's development of a new insulation process; and (3) 2 On Sept. 19, 1991, Mr. Leonard ultimately pled guilty to a criminal information filed against him in the District Court for the Southern District of Texas for obtaining the All American Pipeline contract through fraud. He was sentenced to 3 years of unsupervised probation and fined $1,000.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011