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Petitioners also had encountered difficulties transporting
clothing samples and other items to trade shows and events across
the country. Oftentimes, things got lost or were delayed, which
caused petitioners to miss important opportunities to market
their clothing line to potential buyers.
Mr. Rabinowitz was aware of the advantages of chartering
private aircraft. He had chartered a private aircraft
occasionally to attend board meetings for a public company in San
Jose, California. Petitioners began to charter a jet owned by a
third party to use in CFI’s business when needed. Difficulties
with the availability and reliability of those jets, however,
caused petitioners to consider another solution.
Petitioners decided to buy a jet and offer it for charter.
Petitioners thought they could make money in this activity, do it
better than other aircraft charter companies, and at the same
time provide a safe aircraft for CFI.
Petitioners purchased a Mitsubishi Diamond 1-A aircraft (the
Mitsubishi) and started Beverly Hills Jet (BHJ), their jet
charter activity, in 1985. Petitioners’ business advisers had
recommended that petitioners not cause CFI to purchase the
aircraft to avoid having to list the jet on CFI’s balance sheet.
The goal was to ensure that the jet was not included in a
computation of the ratio of CFI’s available capital to fixed
assets. Instead, petitioners purchased the Mitsubishi
individually rather than through CFI.
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