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Petitioner's practice of purchasing MSP policies on the lives of
its managers began long before 1993.
During 1992 and early 1993, Wiedemann & Johnson (WJ) and The
Coventry Group (Coventry) formed a joint venture (WJ/Coventry)
and approached petitioner with a proposal for the purchase by
petitioner of individual excess interest life insurance policies
on the lives of petitioner's employees. AIG Life Insurance
Company (AIG) was to be the underwriter for the proposed
policies. In a letter dated January 12, 1993, Mr. Alan Buerger,
chairman of Coventry, confirmed a meeting on January 14, 1993,
with Mr. Richard D. McCook, petitioner's financial vice
president. Included with the letter was a memorandum from Mr.
Buerger and Mr. Bruce Hlavacek, chairman and chief executive
officer of WJ, proposing that petitioner purchase a "broad-based
COLI pool".
The memorandum provided an overview section which generally
described a broad-based COLI pool as consisting of a group of
corporate-owned life insurance (COLI) policies covering a wide
cross-section of a corporation's employees. Petitioner was the
proposed beneficiary of the COLI policies to be written on the
lives of petitioner's employees. WJ/Coventry's proposal focused
on two issues raised by petitioner in a prior meeting. These two
issues were described as "(i) achieving positive earnings in
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