Zalman Melnik and Lea Melnik - Page 32

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          preceded, the negotiation and consummation of the private annuity           
          and MMI transactions.                                                       
               The proximity of certain key events, particularly in                   
          combination with petitioners’ failure to prove the precise date             
          of some of the events, is also telling.  Petitioners did not                
          introduce evidence to prove the exact date when the foreign                 
          trusts acquired Clend.  Petitioners would have us believe that,             
          sometime before November 8, 1996, the trusts had acquired Clend,            
          had elected Mr. Maycock a director, and had authorized Mr.                  
          Maycock to execute the stock purchase agreements dated November             
          8, 1996, on behalf of Clend.  As of November 8, 1996, however,              
          Clend had not yet held its first directors’ or shareholders’                
          meetings (the first meeting of directors was not held until                 
          November 22, 1996), it had no director who was authorized to act            
          on its behalf in executing the stock purchase agreements, and it            
          had no assets with which to fund the purchase of the HouTex                 
          shares.  Clend’s shareholders, the foreign trusts, had not yet              
          been funded and would not be funded until Mr. Taub’s checks were            
          deposited and credited to trust accounts on or about January 23,            
          1997.34  The true chronology, incomplete though it is, suggests             
          that documents were executed to create the misleading impression            
          that the foreign entities were formed and functioning before the            

               34Until the checks were deposited and cashed, Mr. Taub could           
          have stopped payment on the checks, thereby preventing the checks           
          from being cashed and used to fund the trusts.                              





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