Investment Research Associates - Page 168




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         Kanter.  It is clear that payments Schaffel made to IRA were in               
         part for Kanter's service of introducing Schaffel to Ballard and              
         Lisle, and that Kanter agreed to share the payments with Ballard              
         and Lisle in a 45-45-10 split.                                                
              Although it is also clear that the payments Schaffel made to             
         Holding Co. were for Kanter's prior service in introducing                    
         Schaffel to Lisle, the record does not show that the funds flowed             
         through from Holding Co. to Lisle.  The payments at issue do not              
         include the payments Schaffel made through FPC Subventure.  Lisle             
         included 90 percent of the FPC Subventure payments in the income              
         reported on his returns.  There is no evidence in the record that             
         Kanter otherwise agreed to share or did share the fees from the               
         Travelers transactions at issue here with Lisle.  Thus, we find               
         that none of the payments were paid to Lisle for his services.                
         4.   The Schnitzer Arrangement                                                
              In 1974, Schnitzer's holding company, Century, purchased                 
         Schnitzer-PMS (Fletcher Emerson at the time) for $1.3 million.                
         The purchase price was based roughly on five times Fletcher                   
         Emerson's pretax earnings of approximately $250,000.44  At the                
         time of the purchase, Schnitzer-PMS had been managing a                       
         relatively small number of Prudential's commercial properties.                

          44                                                                           
               Walter Ross was senior vice president of finance of Century             
          Development Corp. at the time of Schnitzer's purchase of Fletcher            
          Emerson.  Ross testified that it was customary in the industry to            
          base the purchase price of a service corporation such as Fletcher            
          Emerson on the pretax income of the company.                                 





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