-5-
was formed for the purposes of owning, developing, leasing, and
operating a certain subacute rehabilitation unit. Crittenton was
a real estate development entity owned by persons unrelated to
petitioner and Pomeroy.
Debt Settlement
Peachwood Center Associates (PCA)3 owned certain property
which it leased to PNC. Beginning in 1989, PNC sublet the
property to Lakeland. Shortly thereafter, Lakeland disputed the
amount of rent payable under the sublease agreement and declined
to pay the amount of that rate. The situation resulted in an
arbitration proceeding between Lakeland, on the one hand, and PCA
and PNC, on the other hand. The parties to the arbitration
proceeding resolved that and at least one other proceeding (the
Oakland 2 lawsuit described infra in which PCA and Crittenton
sued petitioner, Pomeroy, Arbor, and PNC) through an agreement
that included a debt settlement agreement (debt settlement
agreement) and a related redemption agreement (redemption
agreement).
Pursuant to the debt settlement agreement, dated
November 22, 1995, Lakeland agreed to pay PNC $600,000 in
settlement of $992,796 of disputed rent that PNC consider owed
3 Peachwood Center Associates was a partnership in which
petitioner and Pomeroy each owned a 25-percent interest in 1995
and a 50-percent interest in 1996.
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