- 38 -
compensation.5 He concluded that those aggregate percentages of
48.7 percent and 57.9 percent for 1996 and 1997 were extremely
reasonable by industry standards. Similarly, he claimed that the
compensation percentage for 1998 should be analyzed by combining
the financial data for 1996, 1997, and 1998, given what he felt
was the low aggregate compensation paid for 1996 and 1997. He
computed that, on his suggested aggregate basis, the combined
aggregate compensation petitioner paid for those 3 years was 57.1
percent of its combined 1996, 1997, and 1998 net revenues and
65.4 percent of its combined 1996, 1997, and 1998 pretax income
before payment of aggregate compensation.6 He concluded that
those aggregate percentages of 57.1 percent and 65.4 percent for
1996, 1997, and 1998 were reasonable by industry standards.
Mr. Matthews used a somewhat different analysis in opining
that the compensation petitioner paid to Mr. Wechsler for fiscal
year 1999 was reasonable. He said that, because petitioner had a
negative $10.68 million in net revenue for 1999, the same
5 Combined 1996 and 1997 aggregate compensation paid of
$11.86 million, divided by combined 1996 and 1997 net revenues of
$24.34 million, equals approximately 48.7 percent; and $11.86
million, divided by combined 1996 and 1997 pretax income before
aggregate compensation of $20.49 million, equals approximately
57.9 percent.
6 Combined 1996, 1997, and 1998 aggregate compensation paid
of $21.77 million, divided by combined 1996, 1997, and 1998 net
revenues of $38.15 million, equals approximately 57.1 percent;
and $21.77 million, divided by combined 1996, 1997, and 1998
pretax income before aggregate compensation of $33.31 million,
equals approximately 65.4 percent.
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