- 65 -
On May 26, 1987, Mr. Huestis called Mr. DeCastro and learned
that, after Mr. Kersting had obtained a copy of Mr. Thompson's
April 10, 1987 letter, Mr. Moseley had written to Mr. DeCastro
on behalf of Mr. Kersting and proposed a settlement of the
Kersting/Thompson dispute. During a later meeting that day with
Mr. Thompson, Mr. Huestis agreed to contact another lawyer in
Honolulu, Charles R. Kozak (Mr. Kozak), to discuss whether
Mr. Kozak might represent the Thompsons in a lawsuit against
Mr. Kersting.
On May 27, 1987, Mr. Huestis contacted Mr. Kozak on behalf
of the Thompsons. Mr. Kozak informed Mr. Huestis that he had
represented two other Kersting participants (David L. Bigelow34
34 David L. Bigelow and Patricia L. Bigelow had
participated in the CAT-FIT program during the taxable years
1975 and 1976. In Bigelow v. Commissioner, T.C. Summary 1983-6
(docket No. 3147-78S), the Court held that the Bigelows were
entitled to interest deductions that they had claimed under the
CAT-FIT program, partly on the basis of evidence that the
Bigelows had successfully sued a related Kersting finance company
in State court. Because the Bigelows' case was tried under the
small tax case procedure, the case was not subject to appeal and
is not treated as precedent for any other case. See sec.
7463(b).
Mr. Kozak had represented Mr. Bigelow in a lawsuit against
Mr. Kersting for payment of the "equity build-up" in a mortgage
funding program (presumably Bauspar) following Mr. Bigelow's
termination of the program. Mr. Bigelow won the suit and
collected damages. According to Mr. Kozak, Mr. Bigelow had
prevailed by virtue of Mr. Kersting's promise not to enforce
notes that Mr. Bigelow had signed in connection with his
participation in other Kersting programs. Mr. Bigelow used
Mr. Kersting's written promise that he would not enforce
promissory notes to prevent Mr. Kersting from asserting the
principal on the notes as a defense or offset to Mr. Bigelow's
claim to the equity buildup in the mortgage funding program.
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