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The account was in the name of River City Ranches. Sometime in
1990, Hoyt discontinued using that account. He implemented a new
business practice of commingling all Hoyt organization funds in
one checking account referred to as the pooling account. This
account was in the name of W.J. Hoyt Sons Ranches MLP (MLP). The
funds in the pooling account were then allocated to the various
Hoyt entities on the basis of a percentage determined by Hoyt.
David Barnes (Barnes), a longtime sheep breeder and Hoyt’s
childhood friend, owned and operated a sheep breeding business
called Barnes Ranches. From April 1981 through February 1987,
Hoyt, representing the Hoyt sheep partnerships, entered into
agreements with Barnes Ranches. Some of the sheep partnerships
did not have all of the principal documents evidencing their
purported sheep sale agreements with Barnes Ranches. Each
partnership allegedly purchased breeding ewes from Barnes Ranches
and concurrently entered into a 15-year management or sharecrop
agreement with Barnes Ranches. The purported sheep breeding
activities of the partnerships were not arm’s-length transactions
because Hoyt and the Barnes family were not independent parties
acting at arm’s length. Neither Barnes Ranches nor the
partnerships adhered to the contractual terms of the agreements
for the purported purchase of breeding ewes by the sheep
partnerships. In actuality, the sheep partnerships acquired none
of the benefits or burdens of ownership of any of the sheep.
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Last modified: November 10, 2007