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of Medicor. South Pacific then lent $3 million to Medicor.
Medicor also received $500,000 in intercompany advances from a
subsidiary of Northwest. On June 17, 1971, Capozzi Enterprises,
Ltd., lent $3,648,575 to Medicor so that Medicor could redeem the
certificate of deposit and repay the intercompany advances and
related expenses. In an annual report submitted to the
Securities and Exchange Commission, Medicor reported:
The Registrant [Medicor], by Agreement dated December
17, 1971, borrowed $4,000,000 Canadian funds from the
Bank of British Columbia, Vancouver, British Columbia,
and concurrently therewith repaid a loan made June 17,
1971 by Capozzi Enterprises, Ltd., Vancouver, British
Columbia, to the Registrant in the amount of $3,127,849
U.S. funds and $532,648 Canadian funds. The proceeds
of that loan (June 17, 1971) were used to repay certain
indebtedness of the Registrant’s wholly-owned
subsidiary, the Bank of the South Pacific and Trust
Co., Ltd., to Northwest Sports Enterprises, Ltd., * * *
in the amount of approximately $3,000,000 and the
repayment of additional indebtedness of the Registrant
to Northwest in the amount of approximately $500,000.
These debts were both guaranteed by the Registrant and
its President, T. K. Scallen. * * * [Emphasis added.]
The record does not show whether petitioner guaranteed the
Capozzi loan or whether he received any fees for the guaranties
that he made with respect to the above transactions.
In 1971, petitioner lent $310,000 to Medicor. He received
as collateral all the outstanding stock of South Pacific, which
had a value of approximately $300,000 and a subordinated position
in other investments of $77,500.
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