Zalman Melnik and Lea Melnik - Page 33

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          stock purchase agreements establishing the Melniks’ right to                
          private annuity payments were executed.35                                   
                    4.  Negotiations and Preparation of Documents                     
               Petitioners admit that Clend did not participate in the                
          negotiations with MMI.  Only Moshe Melnik participated in the               
          negotiations.  Petitioners argue that Moshe Melnik represented              
          the interests of all HouTex shareholders in the negotiations, but           
          that claim rings hollow in the absence of any credible evidence             
          in the record that representatives of Bermuda Trust authorized              
          the representation, participated in the negotiations, or made any           
          attempt to ascertain the value of the HouTex shares that Bermuda            
          Trust allegedly held as a fiduciary.36                                      
               The record confirms that Mr. Pennoni prepared the relevant             
          documents without any meaningful input from Bermuda Trust, and              


               35In fact, Moshe Melnik testified that the formation of the            
          foreign trust was delayed until he knew he had a deal with MMI.             
               36In a letter to Mr. Pennoni dated Nov. 22, 1996, Mr.                  
          Maycock wrote as follows:  “It was agreed in our telephone                  
          conversation that you would provide details relating to the                 
          planning purposes for the trust, information on the formation of            
          the underlying BVI company, Clend Investment Holdings Ltd, to be            
          put in place and the nature and value of the stock transaction to           
          be conducted by and through that company.”  In a followup letter            
          to Mr. Pennoni dated Dec. 2, 1996, Mr. Maycock stated the                   
          following:  “Various details relating to the planning purposes of           
          the trusts and for the underlying company were requested in that            
          letter and I know (sic) look forward to receiving same together             
          with the additional items to complete our compliance                        
          requirements.”  Mr. Maycock inserted a postscript indicating that           
          “I have subsequently spoken to you concerning the planning tenets           
          of the trust.”                                                              





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