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required to remit a downpayment at the time the contract was
entered into. The amount of the required payment, labeled a
“deposit”, varied from contract to contract but was always listed
as a portion of the total fee being charged for the services to
be rendered. The standard terms provided that the entire payment
would be retained by BMP upon cancellation by the customer,
unless one of two circumstances occurred. Upon the occurrence of
either of these circumstances, BMP would refund all of the
payment, less a $150 nonrefundable “administrative fee”.2 A
partial refund was available when: (1) The customer canceled an
event due to death or life-threatening illness or injury of an
immediate family member, or (2) the customer canceled with 6
months’ advance written notice, provided BMP was able to find a
comparable engagement for the same date and time. In order to
promote his professional reputation, petitioner usually would
make full refunds to canceling parties, despite the contractual
terms.
In 1996, BMP received $87,660 in downpayments for services
to be performed in subsequent years. In 1997, BMP received
$22,865 in payments for such services. The payments were put
into the same bank account as other business income, and the
funds were not physically segregated in any manner. BMP was not
2In some cases, the amount of the downpayment was less than
$150.
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Last modified: May 25, 2011