Sam and Anna Zhadanov, et al. - Page 9




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               C.   Cash Hoard                                                        
               Checks that Vortex received from Tri-State General and U.S.            
          Trading were deposited into the corporate checking account and              
          recorded in the Vortex general ledger.  However, cash received              
          from Belkin and Edelson and Srebrianski was not deposited into              
          the corporate checking account or recorded in the Vortex general            
          ledger.  Instead, Mrs. Zhadanov recorded the cash in a cash                 
          receipts journal and later into a cash disbursement journal.  The           
          cash receipts journal recorded cash received by Vortex in                   
          connection with the plastic vial production totaling $728,346.              
          The cash disbursement journal recorded expenses and income                  
          generated by the plastic vial production.  With two exceptions,             
          the entries in the cash receipts journal and the summary of cash            
          income in the cash disbursement journal correspond exactly.                 
               Mrs. Zhadanov put the cash from the sale of plastic vials in           
          shoe boxes she kept in a safe located at the Zhadanovs’                     
          residence.  Each shoe box had a tally slip on which Mrs. Zhadanov           
          kept a running total of the balance to indicate whether money was           
          added or removed from the shoe box.  Sometimes, cash from one               
          shoe box was combined with another shoe box in an effort to save            
          space in the safe.                                                          
               Vortex did not report the cash receipts on its income tax              
          returns, financial statements, general ledger, or a 1992                    
          application for a $400,000 loan to buy equipment.                           






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