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sole shareholder of Campco, Inc., a C corporation. Campco, Inc.,
reported taxable income of $16,005 in its Federal income tax
return for the fiscal year ending August 31, 1983.
London Metal Exchange Transaction
Sometime in late 1983, Mr. Campbell had discussions with Tom
Meyers, the CFO of Refco Foods, Ltd., with respect to what has
been described as a London straddle (London straddle). The
London straddle was conducted through Van Lessen Richardson & Co.
(Van Lessen), a brokerage firm controlled by David Lamb, who was
one of the individuals organizing the London straddle. Mr.
Campbell stated that he funded the London straddle by
transferring approximately $2.6 million from petitioner’s Refco
trading account to the Van Lessen account in 1983. Mr. Campbell
explained in his testimony that he took roughly $2.6 million from
the trading account in his wife’s name at Refco as part of the
scheme to generate offsetting losses and he subsequently used
those funds to satisfy the losses in Refco Foods Too and Refco
Foods, Ltd. Petitioner was not aware that Mr. Campbell withdrew
the $2.6 million. Nor did Mr. Campbell consult her about making
the withdrawal. The funds were never returned to the account in
petitioner’s name and never benefited petitioner.
The purported losses generated by the transactions on the
London straddle were fictitious. During preparation of the
Campbells’ 1983 joint income tax return, Jack Esses, a tax return
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