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2. Constructive Dividend Issues
(a) The ERG-Recreation Fund Account
On or about April 5, 1985, Burton submitted an application
to open an account with the Franklin Group of Funds (Franklin)
under the name “ERG-Recreation Fund”. The account was opened and
assigned money fund account No. 1110267091-7 (the ERG-Recreation
fund account). During the years 1988 through 1994, Burton was
the only person with signature authority over the ERG-Recreation
fund account. Checks written against the account were payable
through Bank of America.
In 1988, numerous checks were deposited into the ERG-
Recreation fund account aggregating $4,387.34. Additionally,
checks were written from this account. For example, check No. 6,
dated September 7, 1988, payable to NPI for the amount of $3,000
was signed by Burton. This check was deposited into NPI’s bank
account during the period August 27 to September 30, 1988.
In 1990, numerous checks were deposited into the ERG-
Recreation fund account aggregating $11,097.53. In 1990, three
checks were written on this account, all signed by Burton, for
example: (1) Check No. 7, dated April 5, 1990, for $3,128 was
written to Michael’s Reno Suzuki; and (2) check No. 8, dated June
16, 1990, for $597.44 made payable to Anytime Power Sports
Equipment.
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