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As a consequence of Northwest’s procedures for collecting
payment for ticket stock from its consolidators, petitioner’s
corporations were able to postpone payment for ticket stock for
significant periods. In addition, before 1987, IL NA Tours was
frequently late in remitting payment to Northwest; after the
initiation of the more expedited procedures in 1987, IL NA Tours’
payment delays intensified.
During the periods that petitioner’s corporations held
ticket sales proceeds, petitioner would invest them in the stock
market. Petitioner enjoyed speculating in the stock market,
frequently purchasing heavily margined4 stock. Petitioner used
various brokerage accounts for purposes of investing his
corporations’ funds, including ticket sales proceeds, in the
stock market.
During 1987, petitioner opened the following three brokerage
accounts, among others: (1) Account No. 682-07658 at Merrill
4 “Margin” is a method of buying securities on credit
extended by the brokerage firm handling the purchases. The
securities are used as collateral for the loan. The brokerage
firm establishes a margin account for the customer. The initial
amount of funds in the margin account (initial margin) is
regulated by the Federal Reserve Board. In addition, the
brokerage firm specifies the minimum amount (maintenance margin)
below which the balance in the margin account may not fall before
the brokerage firm will request that either more cash or
securities be added to the margin account or the securities be
sold (margin call). Modern Dictionary For the Legal Profession
517 (1993).
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