Gavin Polone - Page 28

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               After his termination and the conclusion of the settlement             
          negotiations, petitioner felt he had no viable career as a talent           
          agent.  He also did not believe he could start his own talent               
          agency.  Petitioner thus decided to pursue a career as a talent             
          manager and as a film and television producer.  Talent managers             
          are not allowed to procure employment on behalf of clients and do           
          not benefit from the fixed commission rates that talent agents              
          are entitled to receive under their agreements with the talent              
          guilds.                                                                     
               Around May 1996, he started Hofflund Polone with Judy                  
          Hofflund (a former partner at UTA).  During 2001 or 2002,                   
          petitioner formed a production company named Pariah Productions.            
               As of the time of trial, petitioner had at least two                   
          television shows on the air--Family Affair and Hack.  Several               
          pilots he produced had not yet been picked up as series, and he             
          had not produced any feature films.                                         
          Payments Made to Petitioner Pursuant to the Settlement Agreements           
               Pursuant to the employment termination agreement, UTA paid             
          petitioner $950,000 in 1996 and $1,050,000 in 1998.  Petitioner             
          included these amounts on his respective Federal income tax                 
          returns for 1996 and 1998.                                                  
               Pursuant to the defamation agreement, UTA paid petitioner $1           
          million on or about:  (1) May 1, 1996 (May 1996 payment), (2)               
          November 11, 1996 (November 1996 payment), (3) May 5, 1997 (May             






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