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successfully combined those businesses and took them public as
Imperial Credit Industries, Inc. (Imperial).56
During 1996 and 1997, Imperial was a diversified financial
services company. It was involved in franchise lending,
residential lending, income property lending, asset-based
lending, and warehouse lines for mortgage bankers. Imperial’s
investments included, among other things, an equipment leasing
company, a boutique investment bank, and an auto financing
company. In 1996, Imperial had 10 operating divisions. Film
finance was not one of Imperial’s operating divisions.
B. Shopping for Tax Deals
At some point in 1997, Imperial sold its interests in
Franchise Mortgage Acceptance Corp. (FMAC) and Southern Pacific
Funding Corp. (SPFC), resulting in capital gains to Imperial--
approximately $300 million from FMAC and $150 million from SPFC.
In the planning stage of these transactions, Kevin Villani, as
Imperial’s CFO, was asked to develop a plan with favorable
offsetting tax implications.
On August 27, 1997, at a meeting of Imperial’s board of
directors, Wayne Snavely, who was Imperial’s CEO and chairman,
and Mr. Villani reported that Imperial had significant taxable
capital gains to be realized from securities sales in 1997. Mr.
56 At one point, Imperial Bank owned 100 percent of
Imperial; after spinning Imperial out, however, Imperial Bank’s
ownership interest fell to 40 percent.
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