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mutual releases were required by paragraph 6c of the Settlement
Term Sheet, as many settlements of this kind include similar
provisions as standard practice. Mr. Bradley’s attorney, Mr.
Conner, testified that the issue of a general release was not
resolved until the subsequent Implementing Agreement was
executed.
In a memorandum dated June 30, 1995, to Mike Dougherty (Mr.
Dougherty), a tax attorney, Scott Junkin (Mr. Junkin), counsel
for petitioner, expressed petitioner’s desire to structure the
Oralco/Ormet payout such that a portion would be nontaxable. In
his memorandum, Mr. Junkin informed Mr. Dougherty:
CEB wants to know if there is any way to structure the
settlement so that a portion of the ORALCO payments are
non-taxable. He mentioned allocating a portion of the
settlement to the share repurchase and a portion to
dropping his claims under the law suit. I expressed
skepticism about whether any portion could be non-
taxable, but I will defer to you on that. CEB may be
thinking of some analogy to the non-taxability of
settlement payments for pain and suffering in a
negligence suit.
On the same day petitioner signed the Settlement Term Sheet,
through correspondence with his attorney, he sought to confirm
his desire that a portion of the Ormet settlement would be
treated as nontaxable for Federal income tax purposes.
Petitioner expressed his expectations in a letter to Mr.
Dougherty dated August 8, 1995, that $12 million would be
received “for settlement of litigation on a personal injury
basis”. By letter dated August 14, 1995, petitioner asked his
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