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opened an account for the plan. From 1985 through 1990, the plan
invested $192,614 in its account with Prudential, and Sklar,
Greenstein, and Scheer invested collectively $1,323,154.2
By 1991, Sklar, Greenstein, Sheer, their respective spouses,
and the plan (collectively referred to as the claimants) were
dissatisfied with Zahn's account management and filed a complaint
with the American Arbitration Association (the Prudential
litigation). The complaint alleged that Prudential was liable to
them for an array of actionable conduct, including that
Prudential and Zahn recommended inappropriate investments,
engaged in racketeering violations, committed breach of contract
and breach of fiduciary duty, made unauthorized trades, and
committed common-law fraud. Petitioner was not a claimant in the
Prudential litigation.
The Prudential litigation spanned 4 years, 1991 through
1994, and the claimants incurred collectively $578,359 in
attorney’s fees and other costs (the litigation costs). During
the pendency of the case, petitioner paid and deducted $269,078
of the $578,359 in litigation costs, $97,272 of which was paid
1(...continued)
each titled his account either in his individual name, the name
of his spouse, or in his name jointly with his spouse.
2This amount represents the sum of the individual amounts
invested by Sklar, Greenstein, and Sheer, and deposited into
their respective accounts.
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Last modified: May 25, 2011