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company.12 Clend had been incorporated by Arawak Trust Co.
(Arawak) on March 3, 1995, and had conducted no business before
it was acquired by the Rashi and Rambam Trusts. Clend’s
memorandum of association provided for authorized capital of 500
shares of $1 par value stock.
On a date that does not appear in the record,13 Clend
entered into separate stock purchase agreements14 with Moshe
Melnik and Zalman and Lea Melnik to purchase 75 percent of the
outstanding shares in HouTex in exchange for private annuities.
The stock purchase agreements provided that Clend’s obligation to
pay the annuities was an unconditional and unsecured personal
liability and that the Melniks and Lea unconditionally waived all
12The record contains no exhibits confirming that the trusts
purchased Clend or specifying how and when the acquisition
occurred. However, by letter dated Dec. 5, 1996, Arawak Trust
Co. forwarded copies of Clend’s organizational documents to Mr.
Colvin, an attorney in Mr. Pennoni’s office.
13The stock purchase agreements do not show when they were
executed. They show only the date on which they became
effective.
14Mr. Pennoni had prepared the stock purchase agreements and
determined the purchase price for the HouTex stock. Mr. Pennoni
relied upon Mr. Colvin to calculate the annuity payments. Mr.
Colvin consulted the Treasury regulations guidelines for
computing the annuity payments and computed the annuity payments
to be made under the annuity contract using approximately $6
million as the fair market value of 75 percent of the outstanding
HouTex stock. The valuation of the HouTex stock appears to have
been based on the acquisition price offered by MMI and not on the
appraisals prepared in connection with Moshe Melnik’s divorce
case.
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Last modified: May 25, 2011