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Clearly, ERG transferred millions of dollars to NPI. In
reviewing and reconstructing the books and records of the
entities, the accountants inquired as to these transfers. Burton
and the accountants labeled these transfers as payments of
royalties and for engineering services. The royalties were paid
on the basis of an exclusive licensing agreement suggested by
Miller, the mediator of the brothers’ dispute. The balances were
designated “engineering services” by Burton and his accountants.
When asked at trial who came up with the idea of how to
allocate income between NPI and ERG, Bradac testified “Probably
through my suggestion in the early years we were trying to base
it on the income of ERG and we started with a number, somewhere
an average of fifty to seventy-five thousand dollars of profits
for the corporation.” That number was based upon Bradac’s
suggestion because “the tax rates for a corporation * * *
[become] rather prohibitive after 75,000, and also looking at
perhaps the balance sheets and estimating the growth of the
company over those years.” Bradac admitted at trial that “any
plan developed by * * * [Burton], was developed with my
consultation.” For example, Bradac knew that the $483,098 that
ERG transferred to NPI was not for equipment purchased and,
instead, he claimed a royalty deduction in preparing the ERG
returns for 1989 of $252,679 explaining: “I believe it was an
unfortunate tag, meaning the royalty name”. He stated: “And I
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