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Petitioner signed several checks made payable to the IRS on
which appeared Napa’s taxpayer identification number. Petitioner
also signed some Napa checks payable to lawyers and to James
Merriam’s bookkeeper. James Merriam frequently signed
petitioner’s name on Napa documents, including checks.
Ted Merriam prepared articles of dissolution for Napa on
October 17, 1986. Petitioner’s signature as president and Ted
Merriam’s signature as secretary on this document were notarized
by Diane Lalosh (Lalosh), an administrative assistant of James
Merriam. Ted Merriam did not talk to petitioner about the
decision to liquidate Napa.
James Merriam was a party to many lawsuits in which it was
alleged that he had violated securities laws. Petitioner knew
that James Merriam was a party to many lawsuits. Petitioner,
James Merriam, and Napa were defendants in a lawsuit in which
Burton Finkelstein (Finkelstein), an attorney, represented
petitioner and James Merriam. Petitioner signed a $25,000 Napa
check payable to Finkelstein to retain him for legal services.
Finkelstein represented petitioner in a deposition taken in that
case.
Petitioner received substantial amounts each month from
Napa, totaling about $1.5 million in a 2-year period before
September 30, 1986. In June 1986, about 3 months before Napa
liquidated, petitioner bought a Rolls Royce automobile.
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