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shipment of vials, allegedly because the vials were being used by
drug dealers to hold crack cocaine. Vortex ceased production of
the plastic vials for a few weeks thereafter but then resumed
vial production in July 1991. From that date, Belkin and Edelson
paid Vortex for the plastic vials solely in cash.
In an attempt to insulate Vortex from Belkin and Edelson’s
drug activities, Sam Zhadanov entered into a leasing agreement
with Alex Srebrianski, a Vortex employee, in July 1991. The
agreement provided that Mr. Srebrianski’s company, U.S. Trading,
would lease Vortex’s machinery and premises for $8,000 per month
for the purpose of manufacturing plastic vials. In reality,
Vortex continued its production of the plastic vials. Mr.
Zhadanov remained in control of the manufacturing operations at
Vortex and deducted the expenses associated with the manufacture
of the plastic vials on Vortex’s tax returns for the years at
issue.
Alex Srebrianski delivered the vials, collected the cash
payments from Belkin and Edelson, and turned the cash over to Mr.
Zhadanov at the Vortex factory. At the Zhadanovs’ direction,
Alex deposited a portion of the cash receipts into U.S. Trading’s
checking account. He then wrote checks to Vortex from U.S.
Trading’s checking account and included the notation “lease” on
each check.
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