- 247 -
approximately $1.1 million. IRA acquired 47.5 percent of the
common stock with a value of at least $522,500 for $150,000.45
Furthermore, IRA paid $50,000 at closing and issued a promissory
note for the $100,000 balance. IRA did not pay the $100,000
until after Schnitzer told Kanter that he wanted to repurchase
IRA's Schnitzer-PMS stock. Clearly, IRA's purchase of the
Schnitzer-PMS stock was a bargain.
Schnitzer sold the stock to IRA at the bargain price in
exchange for Kanter's promise to use his influence with his
clients, particularly the Pritzkers, to direct business to
Schnitzer-PMS. Schott's and Weisgal's relationships to IRA, as
well as their contacts, were irrelevant. Schnitzer would have
sold the stock directly to Kanter or to any entity that Kanter
wanted to use for the transaction. Moreover, Schnitzer testified
that he would have sold the stock for less than $150,000.
With respect to the repurchase price, Schnitzer-PMS' 1978
pretax income was $832,000. When IRA sold the stock back to
Schnitzer, approximately $700,000 remained outstanding on the
loan for the original purchase of Fletcher Emerson. Based on
five times earnings, at the time of repurchase the entire
45
Under the stock agreement entered into by Century and IRA
when IRA purchase the Schnitzer-PMS stock, upon the death of the
last to die of Kanter, Weisgal, and Schott, Century had the
option to purchase IRA’s stock. The purchase price for IRA’s
stock under the agreement was an amount in excess of 8 times
Schnitzer-PMS’s average pretax income. Eight times Schnitzer-PMS
pretax income for 1977 is over $3.6 million.
Page: Previous 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 NextLast modified: May 25, 2011