PK Ventures, Inc. and Subsidiaries, et al. - Page 19

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          attributable to these transfers was posted to PK Ventures’                  
          general ledger or reported in its audited financial statements.             
          Furthermore, there is no indication that any accrued interest               
          attributable to these transfers was reported in PKV&S’s                     
          consolidated income tax returns for 1987, 1988, 1989, 1990, or              
          1991.                                                                       
               Fifth, no evidence indicates that PK Ventures had the right            
          to enforce the payment of principal and interest with respect to            
          its transfers to the Zephyr purchasers.                                     
               Sixth, 9 of the 10 Zephyr purchasers were shareholders of              
          PK Ventures.  As of August 20, 1987, these nine Zephyr purchasers           
          owned 99.47 percent of the stock of PK Ventures.  Of the                    
          $1 million transferred from PK Ventures to the Zephyr purchasers,           
          Rose received $400,000, an amount proportional to his 40-percent            
          interest in PK Ventures.  There is no evidence of the specific              
          amounts transferred from PK Ventures to each of the nine other              
          Zephyr purchasers.                                                          
               Seventh, based upon Rose’s experience in corporate finance,            
          we are convinced that he could have documented the transfers from           
          PK Ventures to the Zephyr purchasers with promissory notes and              
          arranged for these transfers to occur under terms significantly             
          closer to arm’s length than those that were actually chosen.                
          This conclusion is bolstered by our consideration of the                    
          structure and formality of (1) the financing arrangements into              






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