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purpose of evading the motor fuel oil excise tax. The
assessments were for approximately $6 million including
penalty and interest. Obviously, if successful, the State
would put Self Oil out of business.
A plan was devised by WKS and myself to form a new
corporation (“Newco”). Since Self Oil is entirely owned by
Bob, and Bob was winding down his involvement in the
business, Newco was to be owned by Rob and his brother
Jonathan. The idea was to renew all new customers and
existing customers in to Newco as well as all new HVAC
installations and servicing, while renting the trucks,
facilities and utilizing the personnel of Self Oil. The
thought was that we can justify creating Newco since Bob
wanted to retire but the sons would be unwilling to step in
to Self Oil given all of its liability exposure and
therefore they would agree to “acquire” the business by
paying Bob’s company an administrative fee for the right to
take over the customers and use Self Oil’s infrastructure,
with the intent eventually of taking over the personnel, the
facilities and buying the equipment and vehicles. By doing
this, it was our goal to leave Self Oil with no real value
so that an eventual judgement by the State would not impair
the ability of continuing the business, albeit through
Newco.
In order to allow us to transition the business to Newco, it
was agreed that we would appeal the assessments as long as
we could to buy time. I therefore started the
administrative appeal process with the State, again keeping
in mind that the principal goal was delay with the remote
possibility of convincing the State it was wrong. Everyone
acknowledged that it was very unlikely that we would have
any success in the administrative appeal process. We never
really evaluated the liklihood [sic] of success in court it
being understood that when that time came, we would look at
where we were in the transition of the business and
determine whether pursuing the case any further was
justified. I believe everyone felt the liklihood [sic] of
success was not great and that was the reason for
accelerating the transition, which in fact occurred. This
point was driven home even further when Self Oil later got
an assessment from the State of Ohio for approximately $2
million. I believe the general feeling was to drag it out
as long as possible and then just walk away and defend any
action for transferee liability which the States may
attempt.
[Emphasis added.]
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