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located in the Cayman Islands (AMI Offshore). From AMI Offshore,
the funds were transferred to AMI’s bank account at Texas Commerce
Bank in Houston (AMI Domestic). AMI purchased the Forum 303 note
using the funds deposited with AMI Domestic.
Subsequent Forum 303 Note Transactions
Forum 303, Ltd., began making monthly payments on its note to
AMI beginning on March 28, 1988. Monthly payments for May, June,
and July totaling $105,101 were deposited into the AMI Domestic
account. Thereafter, the funds were routed through AMI Offshore
to the Unicorn Trust account in Guernsey. Although Forum 303,
Ltd., continued to make monthly payments to AMI, no funds were
transferred to the Unicorn Trust account after July 1988.
On November 9, 1988, Mr. Rea rescinded the Forum 303 note
transaction and received $376,664 (the remaining unpaid amount on
the note) from FSLIC. (Apparently AMI had the right to rescind the
transaction at any time.) Mr. Rea did not inform petitioner that
the transaction was being rescinded. Instead of repaying Unicorn
Trust, Mr. Rea kept the proceeds.
In 1992, petitioner, on behalf of Unicorn Trust, sued Mr. Rea
for failing to repay the loan owed by AMI to Unicorn Trust. In
1997, petitioner had the case dismissed without prejudice after
deciding the debt was not collectible. AMI never filed corporate
tax returns reporting income from the Forum 303 note.
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