- 10 -
payable by City to Finance was due only upon Finance’s written
notice to City.
3. 1979 Capitalization of Finance
On July 31, 1979, City drew a check payable to the order of
Finance in the amount of $22 million as a contribution to
capital. On the same day, the check was endorsed by Finance to
the order of HGI. Also on the same day, the check was endorsed
by HGI to the order of City, and City recorded a $22 million
dividend from HGI on its general activity register. HGI issued a
document captioned as a promissory note in the face amount of $22
million (1979 HGI note) to Finance in exchange for the
endorsement of the $22 million check. The 1979 HGI note bore no
interest, was unsubordinated and unsecured, and was payable on
August 1, 1980, or upon demand thereafter.
HGI disclosed the 1979 HGI note as an obligation to Finance
on its audited financial statements for each of the years the
1979 HGI note was outstanding, which statements were submitted to
the Securities and Exchange Commission and various State
regulatory agencies.
City prepared an offering circular for prospective
purchasers of the notes to be sold by Finance in 1979 which
disclosed that City’s $22 million capital contribution to Finance
would be lent by Finance to HGI, that HGI would pay this amount
as a dividend to City, and that Finance’s capital thereafter
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011