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a foreign trust, a foreign corporation, or an Alaska trust. Mr.
Pennoni explained to Moshe Melnik the advantages and
disadvantages of each scenario.
After Mr. Pennoni had reviewed the alternatives with the
Melniks, the Melniks, on a date that does not appear in the
record, chose a transaction in which they would sell part of
their HouTex stock to a foreign corporation owned by foreign
trusts in exchange for annuities. The Melniks were concerned,
however, that their money would not be secure in a foreign
corporation owned by foreign trusts. Mr. Pennoni had dealt with
three trust companies in the past. From those, he selected the
Bermuda Trust Co. (Bermuda Trust), a subsidiary of the Bank of
Bermuda, to set up the transaction.6
Mr. Pennoni also suggested that the Melniks obtain a second
legal opinion about using foreign trusts. He referred the
Melniks to Carlos Kepke, an attorney who formerly practiced with
Mr. Pennoni’s firm and who also utilized foreign trusts in
planning transactions. Moshe Melnik testified that Mr. Kepke
assured him that foreign trusts were safe and that the Melniks
would receive their annuity payments.
6To allay the Melniks’ concerns about using foreign trusts,
Mr. Pennoni introduced the Melniks at some point to David
Richardson, a Bermuda Trust trust officer.
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Last modified: May 25, 2011