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Kanter might eventually help Eulich-Management obtain management
contracts for larger hotels.
Although Connolly was an excellent hands-on hotel manager,
he had no experience with the financial or reporting aspects of
managing a hotel. He participated in the formation of Gateway
Corp. and Essex and the financial arrangement because he wanted
more money than he had been receiving from the company managing
the Gateway Hotel. His participation in this activity was solely
at the direction of Ballard, Lisle, and Kanter. Connolly was
nothing more than a pawn of Kanter, Ballard, and Lisle.
Employees of Eulich-Management performed record-keeping and
reporting services for Gateway Corp., but Eulich-Management did
not charge Gateway Corp. for these services. At least 50 percent
of the money received by the Essex partnership came from Eulich-
Management, which in turn received only 47.5 percent of the
distributions. Under the arrangement, there was no way Eulich-
Management could ever make a profit by participating in the Essex
arrangement. IRA and Holding Co., on the other hand, never
contributed any money to the Essex partnership and never provided
any services to Gateway Corp. or the Essex partnership, yet
together IRA and Holding Co. received 47.5 percent of the
distributions from Essex.
Eulich-Management received back in the form of partnership
distributions most of the payments it made to Essex. The net
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