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to cash cashier's checks or other client checks payable to him
and to give him the cash. He sometimes endorsed client checks to
Edgar, who deposited them in her personal account and wrote a
check in an equal amount to petitioner. Edgar’s checks to
petitioner were deposited in his business account but recorded on
the books as nontaxable loans. Petitioner cashed some client
checks and deposited some in Sieveke’s account instead of
depositing them in the business account.
Edgar kept a record of client checks that were not deposited
in the business account. She and petitioner referred to that
record as the “secret list”. The secret list showed the client’s
name and the amounts of the payments. Edgar kept the “secret
list” in the bottom drawer of the credenza in her office.
Petitioner knew it was there.
Edgar occasionally signed blank checks drawn on her personal
account and gave them to petitioner. Before going on vacation in
1997, Edgar gave petitioner a blank personal check that she had
signed and made payable to him. He dated the check June 9, 1997,
and wrote the amount, $25,000, and the notation “LOAN” in the
memo section. He deposited that check in his business account
and recorded it on his books as a nontaxable loan. When Edgar
returned from her trip, petitioner told her he had written a
$25,000 check on her account. He gave her nine client checks
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