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Philip became president of Gandy’s and remained in that position
during the years in issue.5 Sometime prior to 1993, in a manner
not revealed in the record, Merchant Capital became a 50-percent
owner of Gandy’s.
The Advances in Question
Gandy’s never produced enough income to pay any of the
interest on the $5,040,000 Gandy’s bonds. After
June 1, 1988, Gandy’s was delinquent on its bond interest
payments.6 Philip handled most of the negotiations with the
bondholders with respect to Gandy’s failure to make payments on
the bonds.
In 1990, petitioner was aware that because of a nationwide
recession and because of Gandy’s heavy debt repayment burden
relating in part to the bond project, Gandy’s was experiencing
4(...continued)
Steven K. Bauer (Bauer) both in his capacity as president of
Gandy’s and in his individual capacity. The note was not repaid,
and petitioner sued Bauer. On Feb. 20, 1990, judgment was
entered for petitioner.
On Mar. 22, 1989, PASEL lent $104,000 to Gandy’s pursuant to
a promissory note payable in monthly installments of $10,000 plus
accrued interest, beginning Apr. 1, 1989. The note was cosigned
by Bauer in his individual capacity. The note was not repaid.
PASEL sued Bauer and obtained a judgment that included the
transfer of Gandy’s stock.
5 It is unclear from the record what continuing involvement,
if any, Bauer had in Gandy’s during the years in issue.
6 The Gandy’s project bonds bore interest from Dec. 1, 1987,
at a per annum rate of 11 percent, payable semiannually on
Dec. 1, 1987, and June 1 of each year, commencing June 1, 1988.
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