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In 1982, Mr. Johnson met with representatives of Hall to
discuss petitioner's EVC's. At their first meeting regarding
petitioner's EVC's, Mr. Corde advised Mr. Johnson of potential
alternatives that might be available to petitioner, including the
possibility of petitioner's forming its own insurance subsidiary.
Thereafter, Mr. Corde and Mr. Garrity attended meetings relating
to the planning, structuring, and implementation of petitioner's
subsidiary and petitioner's excess value activity.
In September 1982, at the request of petitioner, Hall
prepared a document titled "United Parcel Service--A Preliminary
Analysis of an Insurance Subsidiary" (preliminary analysis). The
preliminary analysis indicated that Hall understood that
petitioner currently was liable to its shippers for the value of
any parcels lost or damaged up to $100. The preliminary analysis
indicated that Hall understood that those parcels with values in
excess of $100 could be declared by the shipper, and the shipper
could secure protection at a cost of 25 cents per $100 of value
in excess of the first $100. Hall further understood that while
the protection provided by the EVC was not considered to be
insurance, insurance could be provided by a UPS-owned insurance
company. The preliminary analysis then proceeded to make the
following assumptions and conclusions:
We have been advised that the revenues generated by
this "declared value" protection for the 1981 year
approximated $67,000,000 and that the loss in excess of
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