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Sometime in 1992, RAI filed a lawsuit against petitioners and
others, alleging fraud with respect to Mr. Garcia's falsified
contracts. RAI sought $6 million in damages. Petitioners
defaulted, and judgment was entered against them.
Guilty Plea
Criminal charges were brought against petitioner as a result
of his involvement in defrauding RAI. Petitioner pled guilty to
conspiring to commit mail fraud. He was sentenced to 2 years in
Federal prison but served only 17 months. In addition, he was
ordered to pay $7,169,210 in restitution to RAI. (His obligation
to RAI was joint and several with that of the other co-
conspirators.)
Federal Income Tax Return
Petitioners did not report the $271,836 petitioner received
from Mr. Garcia and/or AVD and LI on their 1991 tax return.
Moreover, they did not report any income petitioner received from
his work between October and December 1991 in setting up the bank.
Petitioner's Bankruptcy
On November 1, 1993, petitioner filed for bankruptcy. He
listed Mr. Garcia as having a $270,000 unsecured nonpriority claim.
Mr. Garcia did not file a proof of claim.
On February 8, 1994, petitioner received a discharge in
bankruptcy.
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Last modified: May 25, 2011