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In 1987, West Mill entered into a $52,500,000 construction
loan agreement with Westinghouse Credit Corp. (Westinghouse).
Under the agreement, petitioner and JCC each guaranteed 50
percent of the Westinghouse loan, and petitioner was required to
execute all documents individually and in his capacity as a
corporate representative of JCC (shareholder/president).
During 1991, West Mill defaulted on the loan, and the payment
obligations of West Mill were accelerated. On October 4, 1991,
petitioner spoke with a representative of Westinghouse regarding
a proposed settlement to resolve the default situation. A letter
confirming petitioner’s conversation contained the following
proposals:
(i) West Mill will provide [Westinghouse] with a deed to
Towne Lake in lieu of foreclosure;
(ii) Johnson Consolidated Companies (guarantor of the Towne
Lake loan and controlling stockholder of both West Mill
venturers) will enter into a consulting agreement with
[Westinghouse] and provide consulting services related
to the operation and development of Towne Lake in
exchange for consulting fees approximating One Million
Fifty Thousand Dollars ($1,050,000) on terms to be
mutually agreed upon.
On December 5, 1991, a settlement agreement regarding the
Westinghouse loan was entered into between Westinghouse, West
Mill, petitioner, JCC, LDJ Development Co., and LDJ Construction
Co. Throughout the settlement negotiations petitioner acted in a
dual capacity on his own behalf as a guarantor of the
Westinghouse loan and as a representative of the West Mill
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