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deployed as required and at the same time arrange for
our Bank’s investment group to be appointed as the
investment manager.
Copies of the three proposals are not in the record, and the
record does not disclose what actions, if any, the Melniks and
Mr. Pennoni took to review and comment upon the proposals.
In August 1999,25 Moshe Melnik left MMI’s board of directors
and began pursuing ventures in real estate. Later that year,
Moshe Melnik approached the Bank of Bermuda regarding an
investment property in Houston. In response to the Bank of
Bermuda’s request for additional information on the property and
its potential as an investment, Moshe Melnik sent maps of the
area, as well as information regarding the owner, and explained
that a rail system would be built next to the property. At some
point,26 Clend formed and capitalized a separate company, Tapuz,
Ltd. (Tapuz), to acquire the property (the Tapuz property) for
approximately $1.38 million.27 The funds used by Clend to make
the capital contribution were apparently advanced by the Bank of
25On Nov. 20, 2000, MMI and its affiliates filed for ch. 11
bankruptcy protection. However, over a period from Aug. 18 to
Oct. 1, 1999, Clend had sold 727,360 shares of its MMI stock for
approximately $930,000, so it is not clear from the record in
this case how the bankruptcy impacted petitioners and Clend.
26From the account statements in the record, it appears that
Clend capitalized Tapuz in approximately April 2000.
27The record does not contain any documentation regarding
the acquisition of the Tapuz property, although petitioners
testified that Tapuz purchased the property.
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