Amended 2255 Motion 9-21

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THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release July 29, 1993
PRESIDENT NOMINATES EIGHT U.S. ATIORNEYS
The President nominated eight individuals to be U.S. Attorneys today:
Eric H. Holder, Jr., for the District of Columbia

Michael Joseph Yamaguchi for the Northern District of
California
Randall K. Rathbun for the District of Kansas
Thomas Justin Monaghan for the District of Nebraska
Stephen Charles Lewis for the Northern District of Oklahoma
Vicki Miles-LaGrange for the Western District of Oklahoma
John W. Raley, Jr. for the Eastern District of Oklahoma
Frederick W. Theiman for the Western District of
Pennsylvania
Eric H. Holder, Jr. has been an Associate Judge on the
District of Columbia Superior Court since 1988. Prior to his appointment to that position, he served for 12
years as a trial attorney in the Criminal Division of the Justice Department. His responsibilities at the
Justice Department included the investigation and trial of complex political corruption cases, the
preparation of federal Courts of Appeals briefs and appellate advocacy, and supervision of other
government corruption investigations. Holder holds his B.A. and J.D. degrees from Columbia University.
Michael Joseph Yamaguchi has been an Assistant U.S. Attorney for Northern Califorrua since 1980,
serving for four years in the Civil and Tax Division and more recently in the Criminal Division. He has
also worked during that time as an Adjunct Professor of Law at the University of San Francisco, and has
been active in the American Bar Association. A Captain in the U.S. Army Reserves, Yamaguchi has also
worked as a Visiting Professor of Law at McGeorge Law School in Sacramento, and was formerly an
accountant with the fmn of Peat, Marwick, Mitchell & Co. He earned his B.A. from UCLA, J.D. from the
University of San Francisco, and LL.M. from New York University.
(more)
U.S. Attorneys
page two
Randall Rathbun is a partner in Depew, Gillen & Rabun, a Wichita firm specializing in environmental
litigation. Before joining that firm in 1980, he was with the criminal and civil litigation finn of Curfman,
Brainerd, Harris, Bell, Weigand & Depew. He was previously on the Board of Editors of the Kansas Trial
Lawyers Association Journal, and has spoken widely on topics relating to environmental law. Rathbun is a
graduate of Kansas State University and Washburn University School of Law.
1110nlas J. Monaghan, is a partner in Monaghan, Tiedman & Lynch, an Omaha fmn with which he has
been associated since 1978. He was formerly with the [rrm of Young & White. Monoghan also served
form 1985-91 on the adjunct faculty of the College of 81. Mary, and has spoken at numerous Nebraska
of2 5/7/2009 2:59 p~

EVENTS AND TIME FRAME OF YAMAGUCHI
~~q~1~ GRADUATED COLLEGE WITH B.A. AND DEGREE IN LAW

6 YEARS WORKED FOR PEAT HARWICK IN THEIR TAX DIVISION
, ~u DURING THIS TIME ACQUIRED A MASTER IN LAW FROM NEt.] YORK UNIVERSITY
WENT TO WORK AS ASSISTANT U.S. ATTORNEY
WORKED FOR 13 YEARS, UNTIL 1993 AS AN ASSISTANT U.S. ATTORNEY
1993 APPOINTED BY CLINTON U.S. ATTORNEY FOR NORTHERN CALIFORNIA
1ST YEAR: 93-94: APPOINTED U.S. ATTORNEY

APPOINTED TO A.G. ADVISORY COMMITTEE
2ND YEAR: 94-95: NOMINATED FOR FEDERAL JUDGE BY BARBARA BOXER
INDICTED ARMSTRONG FOR FRAUD
8 FILED AMICUS BRIEF ON BEHALF OF WASHINGTON TO VACATE IN RE. HAMILTON
~~ 4TH YEAR: 96-97: TRIED ARMSTRONG/FOUND GUILTY
SENTENCED ARMSTRONG 9 YEARS
5TH YEAR: 98: REMOVED FROM OFFICE AND ASK TO RESIGN HIS NAME FROM FEDERAL JUDGESHIl
Memorandum
To SAC, SAN FRANCISCO Dale 1/28/94
From SA WILLARD L. HATCHER, JR. (196A-SF-93255) (P)
SubJccl CONNI:.E CHIP ARMSTORNG, JR j

ET AL;'''...
FBW (A) , Mf
00: SF ,,_
Enclosed for the file is a facsimle copy of the

Dresdner $18.9 million note to Hamilton Taft .
. ~- File (196A-SF-93255)
~H/wlh
.1.
HEMMING MORSE
Certified Public Accounlants and Consultants
I 160 Bove' Road, 4th Floor
I San Mateo, Cahtomia 94402
I (415) 574-1900 Fa~imile #: (4151378-4090
FACSIMILE LEAD SHEET

I
I Date/Time:
I
01/18/9403:02 PM
I
rPLEASE DELIVER THE FOLLOWING TO:
Name: Will Hatcher
Firm: Federal Bureau of lnvesbgation

FacsimIle: (510) 834-6551
'----------------:r;::"o::::::'"rA~L:--=p7A:::-G-;:E:;S~IN:-:-C~LU--;;D~I::-:N;-:;G:-~T:::-:H--;;I-;:;:S-:P:-:A:-:G:-:E=-·----:-4
- - - - ------.j
From~I.... _
--I I
Client: Hamilton Taft & Company I

\
!
Endosed IS the a copy of the Dresdner Note dated April 10, 1989. The second
paragraph descnbgs thCl principal as due In fIve yanrs.
I
, The information contained in this facsimile is confidential and may also be attorney-privileged. The
information is intended only for the use of the individual or entity to whom it is addressed. If you are
not the intended recipient, or thQ employee or egant responsible to deliver it to the inlonded recipient,
you are hereby notified that any use, dissemination. distribution or copying of this communication is
strictly prohibited. If you havQ rRceived the fac!1imile in error. please immediatety notify us bV
telephone. and return the original message to u! at lhe address above via the
U_ S. Posbll Service. Thank you.
Please call (415) 574-1900 if an error Ot;CUI'$.

,. l!: 'I. j
April 10, 1989 Dallas c.aunty, '1'exas $18,962,255 .. 00
J'OI VALDB RBCBIVlJ) I th. undersiqned (the ItMakar R ) promises to

pay to the order of HaMilton ~.ft & COBPabY, a california
corporation (the "Holder"), at. 14 Ncaw Montqomery, San Franci6oo,
California 94105, or at such other place or places AP any bolder
of this Promissory Not.e may designata in writing, the principal SWI
ot Eighteen Million Nine Hundred Sixty Two Thousand Twa Hundred
Fifty Five and NO/100 Dollars ($18,962,255.00) in legal and lawful
money of the United states of America, toqether with. int.ert?:st on
tho unpaid balance from time to time remaining u.npaid pri.or to
maturity at the lesser o'f (a) the maxilmna laW'fu~ rate (as
hereinaftQr detined) or (h) nine percent (9%) per annum a Interest
shall be ca-puted on the basia af a 360 day year and for the actual
number of days elapsed (including the first day but excluding-the
last day). unless suCh calculation would result in a usurious rate,
in whiCh case interest ahall be calculated on a per annum basis of
a year of 365 or 366 days, as the caee may be.
Maker shall pay to Halder hereof quarterly installments of

interest hereon commencing october 1, 1989, and continuing for five
(5) years with the final qua.rterly paYlllent consl~ting of all of the
outstanding principal in addition to thQ accrued interest as set
forth here.in. Such quarterly payments shall be made by Mak*r on
or before October 1, January 1, April 1 and JUly 1 of each year
until Eaturity on 3uly 1, 1994. ~l payments are to be applied
f~r$t to accrued interest and the ba1.ance to reduction of the
Unpaid principa.l until the princip~l is paid in full. This
Promissory Note may be prepaid in part or in full at any time
without penalty at the discretion of the Maker.
Ma.kar hereby pledg«as to Holder, as security for the full and

tiMly payment of this Note, all of Maker's rights, title and
interest in, to and under that certain ReneweQ, Modified and
Increased Promissory Note. in the amount of $1,500,000 by and
between Gulf~ex Financial Corporation, a ~exas corporation,
GulfRtates Management Corporation, 8 Texa& corporation 1 Whitehall
Interests, Inc., a Texas corporation I and Whitehall General
Interests, Inc., a Texas corporation. as makers and Hamilton Taft
&I cOlllPany, 8S payee, dated February 16, 1989 (the IIIGulftex Note") ,
which Gulftex Note was Bold to Maker pursuant to tMt certain Sale
and Assignment of Prollissory Notes and Accounts Receivable, by and
between Helder and Maker, dated April 10. 19a9 r and the collateral
s8C\1ring such Gulftex Note; provided that Haker reserves the right
to convert the Maker-s interest in the GUlttex Note into an equity
interQst in the 1lUlkers of the Gulttex Nota or their underlying
businesses; provided further that upon such convBrsion, the Maker's
equi ty interest aball be ple49ed to Holder 85 security far the full
and timely payment of this Bota.
PROMISSORY NotE - p_ge 1

F-~Ol - ~08: 03
t" • LlJ" ,',\. ~\lil. _1\11;
Al.l past due principal and. interest sba1.1 bear interest until
paid at 1:he maximum lawful rat.a of interest. in ac:eordanc8 with the
laws of the state of Texas ana the onited states.
It da:faul t is mad. in the paYJlWlnt of any installlllent ot
principal or int.er••t unt1er this ProJlliasory Note, then Holder Jl4y,
at its option, declare the entire unpaid principal ~alance of and
Accrued and unpaid interest on this prOlaissory Note to be
hU:l!9diate.ly due and payable without notice or doand, foreclose all
liens and security interests seeuring the payment of this
PrClmis80ry Note, or any part thereof, and offset a9~inst this
Promissory Hete any sum or sums owed by the Holder to Maker, all
at the option of the Holder.
The undersigned and all other parties now or hereafter liable
tor the payment hereef, whether as endorser, guarantor, surety or
otherwise, aeverally waive notice of demand, notice of
acceleration, notice of presentment, demand, presentment, notice
of dishonor, diliqence in collecting, grace and protest, and
consent t.o all extensi.ons that from time to tiDe Day be granted by
the Holder hereof and to all partial payments hereon, whether
before or after demand.
No delay or omission on the part of the Holder in exercising
any right hereunder. shall operat.a as a waiver of such right or of
any other right under this Promissory Note. A waiver on anyone
occasion shall not be construed as a bar t.o or waiver of any right
or remedy on any future occasion.
rr thi. Promissory Note is not paid when due, or if it is
collected through a bankruptcy, probate or other court, the
undersigned aqrees to pay all costs of collection, including l but
not 1tmited tOI reasonable attorney's tees, fi1ing fees, costa of
court and other costs and expenses incurred by the Holder hereof.
This promissory Note shall be bindin9 upon and inure to the
benefit of the parties hereon and their respective successors and
assiqns. The Holder may aasi911 any of its right, title or interest
in and. to this Promissory Note or any securi ty aqreements or
collateral in connection herewith withou't the consent of the Maker
hereof.
This PrallliS80ry Note shall be construed under and 1n
accordance with the laws of the state of Texu.
Notwithstandinq anythinq to the contrary contained in this
Promissory Note or in any o~er aqreement entered into in
conneetiOh with or securing the indebtedness evicSenced by this
Proaissory Nota, Whether no\i existinq or h~ftar arisinq and
whether written or oral, it is aqraed that the aggreqate of all
interest and any other charq•• constitutinq interest, or
PROKISSQRY NOTE - Page 2
adjudicated as cClnst1tutinq interest, and contracted for,
cbarqeable or receivable under this Praai••ory Rote or otherwise
ill oonnection. with this loan transaction, ahall under no
a1rcuaatancea 8Kceea t:he total amount ot interest perJIlittecl at the
maxi1llUJll lawtul rate. It froll any circuJb8tance the Holder shall
ever receiv8 interest, or any other Charves conllt1tut1nq interest,
or adjudicated as constituting interest, in axcess of the total
amount of interest which would have been earned at the maximua
lawful rate, the amount of auch eXC8815 interest ahall. be applied
to the reduction of the principal amount owing on this promissory
note or on account of any other principal indebtedness of Maker to
the holder, and not to the payment of intere.st. If the amount of
such exceas interest exceeds the unpaid principal balance or this
Pro.issory Hote ~nd such other inc1.btedne•• , the amount of such
excess interest that 6xceed$ the unpaid principal balance of this
Pro_is8ory Nota and auah other indebtedness shall be refunded to
Maker. All sums paid or aqreed to be ~aid to the Holder for the
usa, forbearance or detention of the indebtedness of Maker to the
Holder ahatl bc aDortized, prorat@d, allocated and spread
throughout the tul.l tarm ot this Promissory Note until payment in
full BO that the actual ratfll of interest on account of such
indebtedness i . uniform throughout the ter1ll of this Promissory
Note.
Dr Wl:'rDU 1IJ.KKRB01", tha Maker bali caused i::.his promi~sory Note

to be made and executed aa of the day ~nd year rirst above written.
DUS~ mrl'BJlPnBB8, DlC.,

a ~ . .a. Oorporation
By' d ,; d t1..,.i'--
:rts: '~d.
fBOKliSOBY NOTE - page 3

ATTC"NE"'S .:-- :...:.w
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Oct::=.er 19, 1981
Mr. :·1 arc Pa i Va

~amilton T2rt & Com~any
1.255 ?ost 5 ~reet
San Francisco, CA 94109
Re: C~ar2c~erization of Fu~cs Kichheld by ~mployer

?or Tax Payments
Dear Marc:
Per your request, this letter Q1SCUSses the characteri-

zation of funds withheld by employers from employee pay
checks in satisfaction of federal and sta:e income taxes,
Social Security taxes, and state ~nemployment insurance ".
taxes. This letter is limited to a discussion of the In-
ternal Revenue Code (III.R.C."), t::Je CaliEQrnia Revenue and
Taxation Code ("Cal. Rev. & Tax. Cadell), ~he California
Unemployment Insurance Code ("Cal. U. Com. Cadell), and the
qeneral responsibilities and duties of a trustee 2S reflected
in the California Civil Code (IiCal. Civ. Cadell).
An employer is required to ~ithhold Erom the wages of

employees amounts in respect of federal income taxes (I.R.C.
§ 3402], Social Security taxes rI.~.C. § 3102], state income
taxes [Cal. U. Com. Code § 13020]. and state unemployment
insurance -taxes {Cal. U. Com. Code § 986J. The employer is
liable for the deduction and wittho1ding of taxes. I.R.C. §
3403; Cal. U. Com. Code 5 13021.
Characterization of Withheld Funds
Funds that 2re withheld or c~llected as income tax or

Social SecL:rity Tax are to be held by the employer as " a
special E:..!nd in trust Eor the United States. I.~.C. § 7501. 1I
U. s. ..' . I-! i 2 1, J 6 8 F. 2 d 6 1 7 t 66- 2 a.:. S • T . C. ~(9 7 3 6 at 873 82 (5 t h
-~----~------ ---
·.... ~:.=~c ?.::.':~.J
. '\2" ::::.:i~ r .::?, ~ ~ ~ ~
::.3.:::.e :·...· 0
~ :. : • I .i 9 6 6}. =- ~ :-: ci s ~ hat: are ~t : :: ~ e 1d c- r :::: __ -= C 1: e des s 'to ate

lnco~e t~X ~re ~o be ~eld b~ : e ~mplcyer as "3 special fund
i n ~ r 'J s t far ': ~ e 3'ta teo f Cal i a C' n i a ~ Cal. '_'. Com. Ca de §
II
13070J; ~hile =~~ds withheld as unemclovmen~ :nsurance tax

.3re to be \·;ithheld "in trust." ::al"U.-Co~. ::ode § 986. The
duty to kee~ wlt~r.e1d taxes as a trust crises as the taxes
are withheld from wages regardless of the 9r~scribed dace Ear
oavment ~o the covernment and cioes not termir.ate until the
t 3 xes are r: aid O'J e r . ~ S t 1 e for C ~J. U.S., 7 5 - : u. S • T . C. .~ 9 4 6 4
(D. :·1 inn. 1975).
During the ?eriod the Eunds are held i~ trust, the person
holding the f~nds assumes, with a few excepc:ons discussed
8elow, the cuties and responsibilities-of a :rustee as such
duties and responsibilities are mandated under common law.
~arsh v. Home Federal Savinas & Loan Assn, 66 Cal. App. 3d
674, 136 Cal. Rptr. 180 (4th D.C.A. 1977). In general, a
trustee is a fiduciary and is bound to act in the highest
good faith toward his beneficiary, must make full disclosure
of material Eacts, must not acquire any adverse interest, and
must not use his position to gain any advantage over the
beneficiary or to make any special profit. Cal. Civ. Code §§
2228-2233. A trustee normally should not ~ingle trust
property with his own, but iE he doss willfully mingle the
trust funds with property of his own, he is absolutely liable
for their safety and Ear the value of the~r use. Cal. eiv.
Code §§ 2236.
A trustee has a general duty to invest funds for the

benefit of the beneficiaries, but he must account over to the
beneficiaries any interest earned. Cal. eiv. Code § 2262.
In investing, reinvesting, or otherwise managing trust property,
a trustee must exercise the judgment and care which people of
prudence, discretion, and intelligence exercise in the management
of their own affairs. Cal. Civ. Code § 2261. California law
provides a-fairly liberal description of the type of investment
a prudent person would make, including every kind of property,
real, personal, or mixed, and every kind of investment which
a prudent person might enter into. rd.
Not wit h s tandin g' the for e ~ 0 in g, the par tie s tot he t r u s t
~ay alter or waive any of the standard provisions and duties.
Rest. 2d, Trusts § 216. It is possible for the parties to a
trust arrangement to authorize commingling of funds, to authorize
the trustee to retain any income Erom the t=~st assets, and
•• ~ =·13 r c r Z; \: ~ oJ
.::cober 29, :961
:::age Three
~o consent ~o ~arious kir.cs at invest~encs. Th; =~se c:

=·:acsh v. HO.-:le Federal Savlr.gs fa Loan Assn., 66 C=.:. ;'pp. ~a
-574, 136 Cal. ~:Jt:L'-; ldO (4th D.C.:". 19-77), is pa=ciculat:ly
~nstructive. At issue in Marsh was the proprie:; and
:"egality of t.he "irnpouild u or "reserve" accounts :::.lstomari1y
required by savings and loan associacions and ba~Ks in
connection with residential ~ortgages to insure ?ayment of
:axes and insurance. The suit was a class action seeking
general and punitive damages and seeking an acco~nting of
interest on the impound accounts, which were cus~omarily held
~ithout interest.
The Court first determined that the impound accounts

~onstituted trusts, not escrows. It then considered in
~etail the nature of a trust and the duties of a trustee,
observing that the beneficiary of "the trust may ~aive the
right to any income and may authorize the commingling of
funds. Thus, the Court noted that the deed of trust authorizing
the impound account stated specifically that the payments by
the plaintiff would be held by Home Federal "in its general
fund without interest," and concluded that the parties had
agreed that the trustees could commingle and use the trust
funds, but did not have to account for any interest earned.
0.
The statute and cases indicate that the trust funds

created by I.R.C. § 7501, Cal. U. Com. Coce § 986, and Cal.
U. Com. Code 5 13070 are subject to some ~odification of the
general rule. Thus, although normally a trustee must segregate
the assets of a trust and not commingle the assets with his
personal funds, see Cal. Civ. Code § 2236, it is not generally
required that the-Iunds withheld for taxes be held separately
from the general accounts of the corporation or ~hat they be
deposited in a separate bank account, Slodov v. ~.S., 436
u.s. 238, 78-1 U.S.T.C. 'i 9447 at 84,206 (1978); Newsome v.
U.S., 431 F.2d 742,70-2 U.S.T.C. " 9504 at 84,149 (5th Cir.
1970). The Treasury or the Franchise Tax Board, as the case
may be, may specially require that withheld taxes be put into
separate accounts, however, in the event the employer has
failed previously to make appropriate deposits, 9ayments, or
returns for such taxes, I.R.C. § 7512; Cal. Rev. & Tax. Code
5 18492.
Furthermore, there is nothing in the statuce or any
regulation or case with which we are acquainted ~o imply that
~he government is entitled to any additional interest on the
trust funds daring the period such funds dre held in trust.
Thus, it would follow that if an employer decided to forego
interest on the trust funds, he, too, could ao so.
- -- -- ------._-----
:.~ r. ~·I arc ? a'.' i .3
October :9, 1981
?age four
~ole of Collectino Ager.~

-
The foregoing discussio~ has considered the situation of
an emolever. There does nee appeer to be cny case law, regula-
tion, or statute dealing wit~ an :~dependent agent who actually
~ays over the taxes to the sovern~ent. The funds presumably
are still trust funds, and the holder of those funds still
bears the responsibilities of a tr~stee. Presumably, however,
the collecting agent may use the funds in the same manner as
the employer ~ight have, and is noc required, insofar as the
Internal Revenue Service or the Franchise Tax Board are
concerned, to segregate the :unds :rorn the general fund of
the collecting agent.
Penalties
The normal penalty for a breach of fiduciary duty by a

trustee is the amount of the loss to the beneficiary. A simi-
lar penalty is imposed by I.R.C. § 6672 or Cal. Rev. & Tax.
Code § 18815: any person required to collect, account for,
and pay over withholding taxes who willfully fails to collect,
account for, or pay over such tax, is liable for a penalty
equal to the total amount of the tax evaded, not collected,
not accoun ted for, or pa id over. ..
The test is "willfullness." Basically, "willfullness n

does not require anintent to deprive the government of its
taxes, Newsome v. U.S., sucra, 70-2 U.S.T.C. at 84,151, but
can be evidenced merely by use of the withheld funds for any
other corporate ~urpo5e, regardless of any expectation that
adequate funds would be available at the due date for the
taxes. Wavchoff v. U.S., 79-2 U.S.T.C. ~ 9602 at 88,195
(S.D. Tex. 1979). Any person who voluntarily and consciously
risks the withheld taxes in the operation of a corporation is
subject to liability under I.R.C. § 6672 (Cal. Rev. & Tax.
Code § le8iS) if SUbsequently the corporation is unable to
remit the withheld taxes. ~ewsome v. U.S., supra.
In addition to the civil penalties, however, there are

also ciminal penalties. I.~.C. § 7202 provides that any
person required to collect, account for, 2nd pay over any tax
who willfully fails to collect, account for, or pay over such
tax shall be guilty of a felony and, upon conviction thereof,
shall be fined not more than $10,000, or imprisoned not more
:.~ [. :·1 arc P a '0· ~.3
OctObEr 29, :'981
?age Five
than five years, o~ both, together with the costs of prosec~

tion. Cal. ~ev. & Tax. Code § 19408 imposes a fine of nat
moce than S2,000 or imprisonment [no stated maximum}, or both
for the similar offense. Although the penalties under these
sections have been imposed only rarely and only in particularly
egregious situations, there is considerable need to be con-
cerned about the potential criminal penalties as well.
If you have any questions or comments.concerning the

foregoing, please do not hesitate to contact us.
DLK/aw
'.
- - - -- - ------ - --
Memorandum
To SAN FRANCISCO (196A-SF-93255) (F) Dale 3/8/91
From s~L.- _ (SQ 5) b7C YI.. ?n IM>1 tJ 1.1 ~.,.l...c-,.oN"

r/ ~~AJ6t./ dd,te-r rf;f.ldf. ;.)4 thiH~
;J
Subject CHIP ARMSTRONG, Jr., elba /J..r 6 I!" II OJ PI'S t./,tr.le...J ~/o s;"
Hamilton Taft and Company tP.od 13tJtev
1 Market Plaza
Spear street Tower
San Francisco, California
FEW; MFi Tax Fraud;
00: SAN FRANCISCO
The purpose of this memo is to document events that

have taken n1g]e since ~ry 13, 199} which is the date that
I was last interviewed by the writer. On that
date,! provided a number of documents to the w,iter which
have been disseminated by the writer to SAl or the IRS
CID here in San Francisco, telephone number 556-6850. It should
also be noted that a copy of these documents along with a summ~ry
of the writer's review of San Francisco file 196A-2868 has been
prepared and disseminated to AUSA MICHAEL YAMAGUCHI at 556-1328.
A copy of this summary is a matter of record under a separate
communication Which is a part of this file.
Due to the fact that AUSA YAMAGUCHI was on annual leave

and did not return to his office until March 4, and/or 5, 1991 no
overt investigation was undertaken. This matter was referred to ~l
Mr. YAMAGUCHI because of his previous referral which he handled
regarding Hamilton Taft in which he SUbsequently declined for
lack of prosecution. This matter was investigated by S~
I lit was handled under SF 196A-2868 and was closed ~ln-------
August, 1988.
with regard to information supplied byl writer I

was reluctant to initiate any overt investigation for tear that
there .~d be Rotential liability attached wherein the ~
government could be accused of initiating the downfall of ~
captioned cpmpapv by,the mere fact that it was making overt
inquiries. L has provided detailed information which, ~
of this date, has been unable to be thoroughly corrobo~ated.
Progress is being made to effect such corroboratlon.
I. I
expressed apprehension in his mind regarding
the ttextensive" time it was taking for the government to decide
whether or not to initiate an investigation and to effect some
.criminal process. He was t.o:l_dJb)~j; th'§-9ov~rnment h9d".-t~tJ}.SiY.?~_~._
victim before any process would be forthcoming. He was further
196A-SF-93255
PKM/sgc
advised on more than one occasion by the writer of the potential

civil 1iabi1ity which might attach to the revelation to the
general public that the FBI was conducting or maybe conducting an
investigation into certain alleged criminal activities op tpe ~
part of Hamil ton Taft. 7 h6k!dtflJr ~/..Ie-~~ ~Jt:.~ 4.dtI (J/(I
\ flRtJ~cc..tZ.-fJt;~ tJr-ill.,1,r(}.4I
Nonetheless, on February ~l, 1991,1 saw fit to I

contact the Congressional offices here in San Francisco of
Congress persons NANCY PELOSI and BARBARA BOXER. The
representative at Congresswoman PELOSI's off,ice to whom I
spoke gavel Ithe name of an investigative reporte-r--t~h~a-t~~h~e
should consider -contacting with his information. On February 12 ';
1991, the writer as well as Agent I lof the eIn repo~d
receiving telephone calls from an attorney at the Department of
Justice making inquiry as to the PBI and/or IRS' connection if
any with Hamilton Taft.
b7C
On February 13, 1991, during the interview of~I ~
conducted by the writer, he was again questioned as to the reason
for making calls to the aforementioned conaressional offices. He
stated that he was concerned about I
I following his resignation from Hamilton

I
~t-o-n-F..le-~b,....r-u-a-r-y-~11-,~1""'!!9!""!!9!""!!1~. It should be noted that
..T....a...f.... I
during this interview on February 13, 1991 re-iterated that fact
that]
I ---------------------T"I.. .H"":""e-w-a-s--.....
again reminded of potential civil liability problems tbat might
ensue from the pUblicatiQO of the possible interest of the FBI
with re~p~~t to Hamilton Taft.
On Wednesday, March 6 1991, the writer received a
telephone call from SAJ - ~ JrRS ern who advised that he
had been called by a M . RALPH :IN , an investigative reporter
for the Wall street Journal here in San Francisco~ The purpose
of KING'S call to SWAIN was to confirm that the IRS was
conducting_AXLinyestiqa~reqardingHamilton Taft. On the
morning of March 6, 1991, the writer reviewed message slips that
had arrived on Tuesday, March 5, 1991, the writer having been on
sick leave that day and one of them was from RALPH KING of the
Wall street Journal. The writer did not return KING's phone
call, however, in resgon~g to a page, for a telephone calIon
the afternoon call Of~~j 1991, the writer became connected
to Mr. KING of the Wall stree~ Journal. The usual inquiries were
made and the usual response, that, is we can neither confirm
and/or deny the existence of any investigation was provided to
Mr. KING who ~ d perturbed Qy ~his response.
2
196A-SF-93255
PKM/sgc
On March 6, 1991, i r head of corporate

security of Sun Micro systems Inc. at 2550 Garcia Ave., Mountain
View, California 94043, telephone number (415) 336-0496 was
called by the writer in response to call that he had made to our
office on March 5, 1991.
writer that his office had

been contacted by was
accompanied by an attorner one (ph) who advised that
the purpose o i l ' Jcontac lcro Systems was to
advise Sun Micro Systems that it had been the victim of a fraud
perpetrated by Hamilton Taft on Sun Micro s:stems and numerous
other corporate clients of Hamilton Taft. I ladvised
the writer that he would fax certain documents up to San
Francisco at the writer's suggestiqn. These documents included a
copy of the service agreement tha~· exists betw~en Sun Micro I s: <io.~ ~'f'
Systems and Hamilton Taft dated(O~~~~er 1, _1987. as well as copies
of certain Federal tax forms whiCh had been executed by employees ~~ ~
of Hamilton Taft Company.
that 1
I I
also advised the
p.ad of his own voliti0t; convened a meeting of
writer\
~:t ~.-
~l ..,c~,
several of the corporate representatlves who he had contacted t-~'
presumably in the first week of March telling these corporations ;: ~.t--..
who are current and/or former clients of Hamilton Taft, that they ~ ~~
had in fact been defrauded by Hamilton Taft. Sun Micro-Systems ) ~ ~
reluctantly agreed to "host lt this meeting which was to take place / t: \ ~
during the afternoon of March 8, 1991 at Sun Micro System's ~ ~~ r-
offices in Mountain View. - ;t.~
"'\~
t\"
Of the mornin: of March 7, 1991,1 through I c:-~
his associatel 1,
an investigator for the corporate ~,
Security Department or un Micro Systems, facsimiled 16 pages of ~~

documents to the writer. The most salient point of these
documents was a letter to Sun Micro Systems dated February 13, _.
1991 from the .IRS in Fresno. The let:ter refers to a particular J~~'u~',~ -
t-~n, identification number utilized by Sun Micro Systems and· :~.~. c: "'-
references a tax period ending September 30, 1990. The letter ;.~~~~.~~, ~:,
goes on to thank tax payer (Sun Micro Systems) for its reply ~ ;.~.; ~
dated January 25,1991 and its payment of $260,784.25 in penalty,~·~·lf-
fees and for its late deposit of ($5,215, 684.86). The --'r.~ l(..
signifira :n e at tb~S :rmmunication is that Sun Micro Systems S~ ~
throughL ~ _ _" has represented, as of March 7, 1991, that,,~ ;:.-
i t did ~n act sen t e appropriate money that is $5,215,684.8 6 f~~ ";5
to Hamilton.
. Taft via.a wire transfer in order to pay employment ~~:
. \:. .
tax oblJ.gatlons do and oWJ.ng the IRS for the tax perlod ended .. ';:.-; ~.
September 30, 1990. Per an agreement of which the writer i~n r~ ~_~ ~
receipt, that is, the service agreement between Hamilton Taft and ~ k
Sun Micro~stems, Hamilton Taft is responsible for the -.
paYlT\ent oLqnyJ..at..e Eenal t~. It is an inference drawn by Sun ~:. k
~
3 ~
I.. \.
~. '~
.~~\,~
.. ..
~
: .. ~-:
>
;t
196A-SF-93255
PKM/sgc
Micro Systems personnel that this document tends to corroborate

what I I was alleging in his representations J,to the . "r- I ,.",-
governmen t . y (f}I'Jt:.- ~ t:~v iJ ~tJ.lh-;£.' ~.... i'h:': n;-t::::.,- --.J,t)~i:',;
-.I
V tt e-f-Ia/r:- tJ
On the afternoon of March 7, 1991~ AUSA YAMAGUCHI was
personally visited by the writer and a brief update was provided
to him of events that have taken place. On March 8, 1991, copies
of the aforementioned facsimiles were provided to AUSA YAMAGUCHI
fore his review. On March 8, 1991, Mr. YAMAGUCHI suggested to
the writer -that efforts continue to accumulate enough probable
cause to cause the issuance of a search warrant for the offices
b7C at Hamilton Taft at the earliest possible date.
The following corporations have been contacted by l

~ :Jand/or his attorney and ~d~~~ed thEt they have been the)
victims of fraud perpetrated on them by Hamilton Taft. These ~I
corporations are Costal Savings Bank, Sun Micro Systems, American
West Airlines, and one or two chemical companies located at the
east coast. In addition,) advised writer that he I
has been contacted by representat~ves of Lloyds of London
Insurance company with respect to Hamilton Taft. It is unknown
how many individual companies will have representatives at the
meeting to be held at Sun Micro Systems offices on the afternoon
of March 8, 1991.
San Francisco at San Francisco, California:

Investigation is continuing.
4*
•
• •
•
•
APPENDIX A
STATEMENTS OF CASH RECEIPTS AND

DISBURSErvlENTS FOR THE DEBTORS AS OF
DECEMBER 31, 1991
.'
•
•
• HemmingMorselnc
let/ilm! rubltc AUDun/i!o-l,
~ I S8n Mal8D Offic!
160 80••1 R030
faufln fl~o'
San Maleo. Cf.. 9~~O,
lelcohon~ 1'151 574·'9ilD
Fa'o I<;E,I 376-~09D
•
•
• Frederick S. Wyle, Trustee for

Hamilton Taft & Company
ACCOUNTANT'S REPORT
• We have compiled the accompanying consolidated statements of cash receipts and

disbursements of Hamilton Taft & Company (a California corporation in bankruptcy),
Knightsbridge Companies, Inc. (a Texas corporation iiiobankruptcy), Remington Companies,
Inc. (a Texas corporation in bankruptcy), and Dresdner Enterprises, Inc. (a Texas corporation
in bankruptcy) and the statement of cash receipts and disbursements of Dresdner Petroleum,
Inc. (a Texas corporation in bankruptcy) for the Post-Petition and Trustee periods ended
December 31, 199] in accordance with standards established by the American Institute of
Cenified Public Accountants.
A compilation is limited to presenting, in the form of financial statements, information that is

the representation of management. We have not audited or reviewed the accompanying
• financial statements and, accordingly, do not express an opinion or any other form of
assurance on them.
1k"'~t1 m~-J2J g(\c-'

• San Maleo, California
February 19, 1992
• I'
I
A-Ol
• •••
CONSOLIDATED HAMILTON TAFT & COMPANY AND TEXAS DEBTORS
(A Group of Affiliated Companies In Bankruptcy)
• Statement of Cash Receipts and Disbursements
For the cumulative Post-Petition periods ended Docember 31, 1991

(See Accountant's Compilation Report)
Cumulative for Post-PetitiDn PeriDds
• Receipts:
Hamilton Taft
To 10/31/91
Texas Deblors Consolidated
To 10/31/91 Since 11/01/91
Consolidated
Total
Gross real estate sales 711,250 120,000 831,250

Less sales costs (158,875) (20,937) (179,812)
Net proceeds from sale of real estate 552,375 99,063 651,438
• Net proceeds from sale of livestock-HTC Ranch

Net proceeds from sale of other assets
Interest received
192.174
156,956
169.054
167,412
284
139,449
17,680
14,403
331,623
342,048
183,741
Meadow Owens settlement 400,000--- 400,000
Other receipts (See Detailed SchedUle} 186,380 78,793 19,490 284,663
Total Receipts 704,564 798,865 690,085 2,193,5t3
• Disbursements:
Employee costs: Ranch (Since B{01,r91) 37,136 20,179 57,315
Employee costs: Other 445,270 268,805 21,415 735,490
Subtotal: Employee costs 482,406 268,805 41,594 792,805
Other operating costs (See Detailed Schedule) 469,098 16,829 79,009 564,936
Professional Fees: Trustee and Trustee's Professionals
Trustee's Attorney & Accountant 634,4Q4 342,399 976,803
Trustee's Appraiser and Consultants 20,811 7,570 13,664 42,045
Trustee's fees 104,088 104.08&J1"'.'Jf!.,
Professional Fees: Creditors' Committee 14,536 23.394 37.930
Professional Fees: Debtor-in-Possession 13.516 6,435 19,951
• Ranch operating costs

Settlement Bank One furniture lease
Trustee's administrative costs
16,114
188,945
5,835
20,380
452
36,494
188,945
6,287
Trustee's bond 600 600
U.S, Trustee fees 4,500 2,100 6,600
Disbursements for operations 1,940,737 309,420 527,327 2,777,484
Net transfers to Petroleum 60,000 60,000
• Total disbursements
Excess 01 Disbursements over Receipts

1,940,737
(1.236,173)
369.420
429,445
527,327
162,758
2,B37,484-
(643,971)
Beginning Cash and Cash Equivalent Balances

Balance as 01 bankruptcy petition 5,856,509 74,133 5.930,642
• Ranch cash balance as of August 1, 1991

Transfer of Texas Debtors' cash balances
1,730
503,5n {503.577!
1,730
0
Ending Cash and Cash ECjuivalenl Balances $5.125.643 $0 $162,758 ~288!401
• A-02
•
" •
Statement of Cash Receipts and Disbursements
For the cumulative Post-Petition periods ended December 31,1991

Cumulative for Post-Petition Periods

Tems DBbtolS Consolidated Consolidated
•
Hamilton Toft
To 10[31[91 To 10{31/91 Since 11[01/91 Total
D9t~i! 12~ Otheo: Re!:;>9ipt.s:

Monthly service fees $32.109 $32,109
Returned customer checks (Pre-Petition) 97,455 97,455
Net customer funds (Tax Agency funds) 24,974 24,974
• Other receipts
Total Other Receipts

31,842
$186.380
78,793
$78,793
19,490
$19.490
130,125
$284,663
Detail of Other Operating Costs Paid:

Equipment leases $9,979 $4,947 $14,926
Insurance 78,741 $7.885 86,626
• Utigation costs
Office supplies & expenses
Other costs of operations
1,411
0
51,006
234
30,699
36,397
10,988
6,375
124
12,632
37,074
87,527
Outside services 0 5,814 15,398 21,212
Postage,freight & shipping 4,283 518 4,801
Publication costs 12,961 12,961
Relocation costs 15,905 15,905
Rent 72,658 35,327 13,699 121,684
Supplies 11,873 11,873
Telephone 15,573 9,875 1.573 27,021
Travel & auto expenses 17.453 855 18,308
Work-In-Process: Real Estate 14.147 20,550 34,697
• Affiliate expenses paid

Accrued liabilities: Post-Petilion
Costs allocated to other affiliates
2,946
127,426
(143,554)
609
2,946
128,035
(143,554)
Prepaid expenses & deposits 62,522 5,490 68,012
Property and equipment 1,814 435 2,249
• Total other operating costs $469,098 $16.829 $79,009 $564,936
• A-03
•
'.
For the cumulative periods of Trustee Administration ended December 31, 1991
Cumulative Trustee Periods

Hamilton Taft Texas Debtors Consolidated Consolidated
• Receipts:
Gross real estate sales
To 10/31/91 To 10/31/91
$593,750
Since 11/01/91
$120,000
Total
$713,750
Less sales costs (134.192) (20,937) (155,129)
Net proceeds from sale of real estate 459,558 99,063 558.621
• Net proceeds from sale of livestock-HTC Ranch

Net proceeds from sale of other assets
Interest received
192,174
156,956
169,054
167,412
284
139,449
17,680
14,403
331,623
342,048
183,741
Meadow Owens settlement 400,000 400,000
Other receipts (See Detailed Schedule) 186,380 75,197 19,490 281,067
Total Receipts 704,564 702,452 690,085 2,097,101
• Disbursements:
Employee costs: Ranch (Since 8/01,'91)
Employee costs; Other
37,136
445,270 195,523
20,179
21.415
57,315
662,208
Subtotal: Employee costs 482,406 195.523 41,594 719.523
Other operating costs (See Detailed SchedUle) 469,098 (5B,645} 79,009 489,463
Professional Fees: Trustee and Trustee's Professionals
Trustee's Attomey & Accountant 634,404 342,399 976,B03
Trustee's Appraiser and Consultants 20,811 7,570 13,664 42,045
Trustee's fees 104,OB8 104,088
Professional Fees: Creditors' Committee 14,536 23,394 37,930
Professional Fees: Debtor- in - Possession 13,416 6,435 19,851
Ranch operating costs 16,114 20,380
• Settlement Bank One furniture lease
Trustee's administrative costs
Trustee's bond
188,945
5,835
600
452
36,494
188,945
6,287
600
U.S. Trustee fees 4,500 2,100 6,600
Disbursements for operations 1.940,737 160,565 527,327 2,628,629
Net transfers to Petroleum 70,500 70,500
• Total disbursements
Excess of Disbursements over Receipts

1,940,737
(1,236,173)
231,065
471,387
527,327
162,758
2,699,129
(602,028)
Beginning Cash and Cash Equivalent Balances

Balance as of appointment of Trustee 5,856,509 32,190 5,88B,699
Ranch cash balance 8S 01 August 1, 1991 1,730
• Transfer of Texas Debtors' cash balances
Adjusted beginning balances
503,577 (503,577)
1,730
0
Ending Cash and Cash Equivalent Balances $5,125,643 $0 $162,758 $5.2B8,401
• A-04
. - -- -- -------- --- -----------------
• •
• Statement of Cash Receipts lind Disbursements
For the cumulative periods of Trustee Administration ended December 31,1991

Cumulative Trustee Periods

Hamilton Taft Texas Debtors Consolidated Consolidated
• Dli!tJ,IiI of Othor Raceipts:

To 10131/91 To 10/31/91 Since 11/01/91 Total
Monthly service fees $32,109 $32,109

Returned customer checks (Pre-Petition) 97,455 97,455
Net customer funds (Tax Agency funds) 24,974 24,974
• Other receipts
Total other receipts

31,842
$1B6.380
75.197
$75,197
19,490
$19,490
126,529
$281 ,067
Detail of Other Operating Costs:

Equipment leases $9,979 $9,979
Insurance 78,741 7,885 86,626
• litigation costs
Office supplies & expenses
Other costs of operations
1,411
51,006
o 27,382
261
10.98B
6.375
124
12,399
33,757
51.391
OutsIde services o 15.398 15,398
Postage,frelght & shipping 4,283 518 4,801
Publication costs 12,951 12,961
Relocation costs 15,905 15,905
Rent 72,658 31,994 13,699 118,351
Supplies 11,873 11,873
Telephone 15,573 4,291 1,573 21,437
Travel & aulo expenses 5,507 855 6,362
Work-In-Process: Real Estate 12,735 20,550 33.285
• Affiliate expenses paid

Accrued liabilities: Post-Petition
Costs allocated to other affiliates
2,946
127,426 (143,554) 609
2,946
(15,519)
Prepaid expenses & deposits 62,522 2,740 65,262

Property and equipment 1,814 435 2,249
• Total other operating costs $409,098 ($58,645) $79,009 $489,463
• A-OS
• & e;
DRESONER PETROLEUM. INC.
(A Texas Corporation in Bankruptcy)
For the cumulative Post-Pelition Period and the cumulative

period of Trustee Administration ended December 31. 1991
• Post- Petition
Period:
4/29/91
Trustee
Period:
7/22/91
Through Through
12/31191 12/31/91
Receipts:
• Oil and gas revenues

Less costs of production
Net proceeds from oil and gas revenues
$667,915
416,422
251,493
$415,613
332,'50
82,863
Interest received from Affiliates 151 151
Other receipts 5,341 1,850
Refund of legal fees 7,759 7,759
• Receipts before transfers from Affiliates

Transfers From Affiliates:
Transfers from Knightsbridge
264.742
60,000
92,622
60,000
Repayment of Petroleum transfer to Remington 10.500 10,500
Total receipts 335,242 163,122
Disbursements:
Employee costs 259,421 134,331
Insurance 9,941 9,941
Interest paid to affiliate 78 78
Office expenses 767 746
Property taxes 403 403
Purchase of field equipment 6,633 6,633
• Rent
Telephone
Travel and entertainment
14.887
6.995
182
8,220
597
182
Trustee's bond 300 300
U.S. Trustee fees 3.000 2,250
Disbursements 10r o~erations 302,607 163,681
• Transfers To Affiliates:
Transfer to Remington
Total disbursements
10,500
313.107 163,681
Excess receipts (disbursements) 22,136 (559)
• Beginning cash balance
Ending cash balance

25,023
$47,159
47,718
$47,159
• A-06
-------- _ . _ - - - - - - - ~ - - - - - - - - - - - - - -
•
CONSOLIDATED HAMILTON TAn' & COMPANY AND TEXAS DEBTORS
•
-
•• __.j
(A Group of Afriliated Companies in Bankroptry)
aod
DRESDNER PETROLEUM, INC.
Notes to Statements of Cash Receipts and Disbursements
For the period ended December 31, 1991
•
Note 1: Consolidated Hamilton Taft & Company and Texas Debtors
. The accompanying consolidated statements of cash receipts and disbursements

include the accounts of the following companies:
1) __ Knightsbridge Companies, Inc. (Knightsbridge);
2) Knightsbridge's wholly owned subsidiaries including Hamilton Taft &

Company (Hamilton Taft) and The Remington Companies Inc.
• (Remington);
3) Remington's wholly owned subsidiaries including Dresdner Enterprises,

Inc. (Enterprise) and Remington Corporate Financial Group, Inc.;
4) Enterprise's wholly owned subsidiaries including DEl, Inc., Chayson

Mortgage and Investment Company, Cal-Pacific Management Corp.,
and Suisse Texas, Inc.
Non-Consolidated Operations: Knightsbridge also owns a controlling interest in

Dresdner Petroleum, Inc. (Petroleum) and Remington also owns a controlling
• interest in Parker Automotive (also known as Carbonclean). The operations of
neither Dresdner Petroleum, Inc. nor Parker Automotive have been included in the
consolidated financial statements.
The term "Texas Debtors" as used in these statements of cash receipts and
• disbursements means Knightsbridge, Remington and Enterprise. Petroleum's
statement of cash receipts and disbursements is presented separately.
Several of the affiliated companies have filed for protection under Chapter 11 of
the United States Bankruptcy Code. On March 20, 1991, an involuntary petition
• was flIed in San Francisco for Hamilton Taft and on March 26, 1991, Frederick S.
Wyle was appointed as trustee in bankruptcy.
• A-O?
•
•
(A Group of Affiliated Companies in Bankrnptcy)
• and
DRFSDNER PETROLEUM, INC.
Notes to Statements of Cash Receipts and Disbursements
For the period ended December 31, 1991
•
(Note 1 Continued)
Knightsbridge med for protection under Chapter 11 of the United States

• Bankruptcy Code on April 19, 1991 and Remington, and Dresdner Enterprises
filed on April 29, 1991, all in Dallas, Texas.
On July 22, 1991, Frederick S. Wyle was appointed as interim trustee in

bankruptcy for Remington, Enterprises and Knightsbridge. His appointment was
• made permanent on November 4, 1991.
On November 4, 1991, the Bankruptcy Court ordered the substantive consolidation

of Hamilton Taft & Company, and the Texas Debtors including Remington,
Enterprises and Knightsbridge. Frederick S. Wyle was appointed trustee for the
consolidated estates.
The accompanying statements of cash receipts and disbursement include both the
Post-Petition periods and the periods of Trustee administration for each debtor.
For Hamilton Taft, the Post-Petition period and the period of Trustee
administration date from March 20, 1991 (even though the trustee was not
• appointed until March 26, 1991). The Post-Petition period for the Texas Debtors
dates from April 19, 1991 for Knightsbridge and April 29, 1991 for Remington
and Enterprises. The period of Trustee administration for the Texas Debtors dates
from July 22, 1991, the date of the appointment of the interim trustee.
Note 2: Dresdner Petroleum; Inc.

• Dresdner Petroleum filed for protection under Chapter 11 of the United States
Bankruptcy Code in Dallas, Texas on April 29, 1991. On July 22, 1991,
Frederick S. Wyle was appointed as interim trustee in bankruptcy. His
appointment was made permanent on November 4, 1991. For the accompanying
• statement of cash receipts and disbllTsements, the Post-Petition period for Dresdner
Petroleum dates from April 29, 1991 and the period of Trustee administration dates
from July 22, 1991.
• A-OS
•
• APPENDIX B
ACCOUNTANT'S REPORT ON SOURCE AND

APPLICATION OF FUNDS FOR
CONNIE C. ARMSTRONG, JR.
• JANUARY 1, 1989 - JUNE 15, 1991
•
• HemmingMorselnc
Cerrdlt:1f Public A CCOUttl8ftl~
~ I San MaiaO Office
160 Bovel Road
fnunh flDnr
San M.lee.
i fa,
C~ 94402
1elephDnp 1415. j7~·19KI
14'~1 3iB·dOg:,
•
•
• Frederick S. Wyle, Trustee for

Hamilton Taft & Company
ACCOUNTANTS'REPORT
• We have applied certain agreed-upon procedures, as discussed below, to the accounting

records of Connie C. Armstrong, Jr. and of the Annstrong Affiliated Entities, inclUding
Hamilton Taft & Company, Remington Companies, Inc. and Knightsbridge Companies, Inc.
OUT study was made solely to assist you in your duties as Trustee and our report should not
be used for other purposes. The procedures we performed are summarized as follows:
• a) Evaluated Connie C. Armstrong, Jr. 's source and application of funds during the
period January 1, 1988 through June 15, 1991 as described in the documents prepared
by l..arry D. Gillilan and further described in Note 1 to the Source and Application of
Funds.
b) Traced payments to and receipts from Mr. Armstrong, as recorded in the Affiliated
Entities accounts of employee receivables owed by Connie C. Armstrong, Jr. and
notes payable to Connie C. Armstrong, Jr., to the corresponding deposits and
disbursements in Mr. Armstrong's personal accounts.
• c) Segregated and identified the payments on behalf of Mr. Armstrong by the Affiliated
Entities that were included in accounts of employee receivables owed by Connie C.
Armstrong, Jr. and notes payable to Connie C. Armstrong. Jr.
d) Reconciled compensation paid during the 1989 through 1991 periods to

Mr. Armstrong by Hamilton Taft & Company and Remington Companies, Inc.
• (Remington) to the corresponding deposits in Mr. Annstrong's personal accounts.
e) Reconciled reimbursed expenses paid by Remington during 1989 to the corresponding

deposits in Mr. Armstrong's personal accounts.
• t) Reconciled the acquisition of identified assets to the respective acquisition funding

identified in accounts of the Affiliated Entities and of Mr. Armstrong.
• I
I
B-01
• • •
• Frederick S. Wyle, Esq.
Accountants' Repon
Page 2
• Our findings are presented in the attached Source and Applialtion of Funds for the period
January I, 1989 throLigh June 15, 1991, which describes a total source of funds amounting to
$16.670,032 and an application of funds amounting to $16.585,263. This schedule is further
described by the following schedules and notes:
• Schedule 1:
Schedule 2:
Payments To or On Behalf of Connie C. Armstrong, Jr.: 1989
Payments To or On Behalf of Connie C. Annstrong. Jr.: 1989-1991
Schedule 3: Application of Funds: January 1, 1989 through June 15, 1991
• Notes to Source and Application of Funds
Because the above procedures do not constitute an examination made in accordance with
generally accepted auditing standards, we do not express an opinion in accordance with those
standards. In connection with the procedures referred to above, except for the discrepancies
discussed in the notes to the Source and Application of Funds, no matters came to our
attention that caused us to believe that the attached statement and schedules required further
adjustment. Had we performed an examination in accordance with generally accepted
auditing standards, other matters might have come to our attention that would have been
reported to you. This report relates only to the accounts and items specified above.
• 1fe»U'IU0f m ~, Irr ~ fI<:-.·

San Mateo. C~ifomia
February 19, 1992
•
,. Hemming Morse
',,"I"~ ~r:: 4rr.c.."ul1~J
..
B-02 ".D~ ":!
• • .'
• B-03
•
• Schedule 1
• CONNIE C. ARMSTRONG, JR.

SOURCE OF FUNDS
Payments To or On Behalf of Connie C. Armstrong, Jr. - 1989
(See Accompanying Notes and Accountant's Report)
1989 PBymen s
• A Payments flam HTC and Affiliated Entities:

I
To
CCA Jr.
On Behaff
afCCA Jr. Total
1 Compensation
a) 1989 Hamilton Tafl salary, net 01 withheld taxes $55,046.89 $55,046.89
b) 1989 Remington salary, net otwithheld taxes 152,052.20 152,052.20
0) Director Fees 5,000.00 5000.00
• SUbtotal: Compensation
2 Payments Booked As RGimbursement 01 Expenses

212,099.09 212099.09.
a) Remington payments 65,811.93 65,811.93

b) Hamilton Taft payments 25,184.71 2S 184.71
Subtotal: Payments booked as reimbursement of expenses 90,996.64 90,996.64
• 3 Other Payments From Affiliated Entities

a) Remington payments booked as advances - -
1) Cash paid to Armstrong 169,005.00 169,005.00
2) Legal fees reclassified as advance 232.730.19 232,730.19
3) Hamilton Taft purchase costs reclassified as advance 615,008.12 615,008.12
4) Payment to IRS 49.945.27 49,945.27
5) Other transactions, net of adjustments and repayments 31199.15 31 199.15
Subtotal: Remington payments booked as advances 169,005.00 928,882.73 1,097,887.73
b) Cash advanced by Chase PULEC 3,853.20 3,853.20

c) Cash advanced by Chase Condo 1,000.00 1,000.00
d) Cash advanced by Gulftex (PIF) 8,000.00 8,000.00
• f} Cash advanced by River City

SUbtotal: Other payments from Affiliated Entities
5000.00
186858.20 928682.73
5,000.00
1 115740.93
Total Payments flom HTC and Affiliates I 489,953.93 928,882.73 1,418,836.66
B Payments from Other Identified Sources:
• 1 Rental earnings
2 Loan repayments
3 Interest eamed
-9,662.90
2.500.00
1,886.33
4 Other receipts 2,481.87
Total payment from other identified sources 16,531'.10 16,531.10 I
• C Payments frorn unidentified sources (See note 2 c) 58,688.21 58,688.21 I
Total 1989 payments to or on behalf of eCA, Jr. I $565.173.24 $926,882.731 $1,494,055.971
• 8-04
•
• Schedule 2
• SOURCE OF FUNDS
Payments To Or On Behalf Of Connie C. Annstrong, Jr. 1990-1991
1990-91 Payments
• A Payments from HTC and Affiliated Entities:

A.-1 Compensation
I
To
CCA Jr. r
On BehalfofCCA, Jr.
Ranch Other Total
a) 1990-91 HTC salary, net 01 withheld taxes $173,397.84

b} 1990-91 Remington salary. net ofW/H taxes 351,oaa.3B
d} 1991 Parker salary, net of withheld taxes 17,200.32
$541,686.54
•
Subtotal: Compensation 541,686.54
A-2 Director Fees and Other Compensation

a) Remington Director Fees 12,500.00
,
b) CCAJ Director Fees 16,000.00
c) River City Director Fees 5,000.00
d) Remington "bonus· received 4/16J90 65,100.00
Subtotal: Director fees and other compensation 98,600.00 98.600.00
• A-3 Proceeds from sale 01 2 Sladium Boxes 265.000.00 265,000.00
A-4 Payments Booked As Reimbursement Of Expenses

a) Remington payments 223.732.68
b) Hamilton Taft payments 48.261.97
c) Combined deposits of both Remington and HTC
payments which have not been distinguished 33,713.15
Subtotal: Payrrents booked as reimbursements 305,707.80 305,707.80
A-5 Other Payments From Affiliated Entities

a) Remington/Knightsbridge payments (SCh.2-A) 2.008.100.00 367.250.00 1,856,948.89 4,232,298.e9 I
b) Winthrop Payments:
• 1) Payments to or for Double C Ranch

2} Payments to Armstrong 868,000.00
8,729,000.00 8.729,000.00
868,000.00
c) Payments from Ranch accounts 48,295.21 48,295.21

d) Payment from Chase Development 35 000.00 35000.00
Subtotal: Other payments from Affiliated Entities 2959895.21 9,096,250.00 1.856948.69 I 13,912,594.10
• Total payments from HTC and Affiliates I 4,170,389.55 9,096,250,00 1.856,948.89 15,123.586.44
8 Payments From Other Identified Sources:

B-1 Receipt noted "tlEP FROM 1~B9 &ALA GFS" 13,348.73
B-2 l.!lan repayments rece.illed 5,600.00
8-3 Dividends received 4,180.22
• 8-4 Interest received
8-5 Reimbursements for travel expenses
8 -6 Other reimbursements
3,012.78
8.641.96
17,603.56
Total payments trom other identified sources 52,387.25 52,387.251
• Total 1990-91 payments to CCA, Jr. i $4,222,n6.8D $9,096.250.00 $1,656,948.891 $15,175,975.691
• B-05
• &
Schedule 2-A
• SOURCE OF FUNDS
Payments To Or On Behan Of Connie C. ArmstrDng, Jr. 1990-1991
Detail Of Schedule 2 A-S (8): Other Remington/Knightsbridge Payments
(See Accompanying Notes Bnd Accountant's Report)
1990-9 1 P avrnants
• On Behalf of CCA, Jr.

To
I CCA, Jr. Ranch Other Total
Other Remington/Knightsbridge Payments:
1 1990 cash transfers to Armstrong $995,100.00 $995,100.00
2 1990 cash transfers to Ranch accounts 367,250.00 367,250.00
3 1991 cash transfers to Armstrong 1,O13,~.OO 1,013,000.00
4 Remington 10/29/90 check: to David McCall 30,000.00 30,000.00
5 Knightsbridge 1/25/91 checks to McCalls 500,000.00 600,000.00
• 6 Knightsbridge payments for Aspen Condo

7 Remington purchase of 3 Stadium Boxes
e Remington payments for improvements to Stadium Boxes
335,000.00
390.000.00
20,631.44
335,000.00
390,000.00
20,631.44
I
g Payment to American Cancer Society for Red Jaguar 105,000,00 105.000.00

10 Payment to CNerseas MotolS for personal auto expense s 6.626.25 6,626.25
, 1 Payment for Ranch truck 27,767.68 27,767.68
12 Cash advanced toltor Colfea International 295,000.00 295,000.00
• 13 Other expenses paid on behalf of CCA, Jr.

Subtotal: cash transactions 2.008100.00 367,250.00
33,923.52
1 843,948.691
33,923.52
-4 219,298.B9
14 Other Payments per Armstrong

Unidentified entry in CCA, Jr. Transaction Report 13.000.00 13,000,00
Subtotal 13.000.00 13.000.00
Total other Remington/Knightsbridge payments $2008100.00 $367 250.00 $1 855948.89 $4 232298.89
• 8-06
•
Schedule 3-A
CONNIE e. ARMSTRONG, JR.
• APPUCATION OF FUNDS
For the period January 1, 1989 through June 15, 1991
Payment Payment
From eCA, Jr. From Affiliate
• 1 Double C Ranch:
a) Acquisition of Property:
Date Account Account Total
1) Purchase of Stieler Parcel (See Note 4) 12/04/89 $72,429.04 $72,429.04

2) Purchase of Williams Parcel 02/09f,1J 6,500,000.00 6,500,000.00
b) Advances for Ranch operations Various 57,969.88 1,023,439.21 1,081.409.09
• c) Payments for Ranch improvements

d} Purchases of liveslOck & equipment
Various
Various
42,152.00
90,979.00
1,060,797.25
512,013.54
1,102,949.25
602.992.54
Total payments associated with D.Duble C Ranch $263.529.92 $9.096,250.00 $9,359.n9.92
2 Investment Costs and Expenses:
• a) Acquisition of Hamilton Taft & Co. (See Note 3):

1) Payment to Stanley Rosenberg
2) Legal fees paid by Remington
05/01/89 $615,008.12
232,730,19
$615,008.12
232,730.19
3) Armstrong purchase of stock 06/2.0/89 33.000.00 33,000.00
Subtotal 33,000.00 847,738.31 880,738.31
4) Other payments to Hamilton Taft & Co.
(No purpose designated) 4,000.00 4,000.00
Totsl payments to or for HTC acquisition 37,000.00 847,738.31 884,738.31
b) Investment in Pro-Rodeo, Inc. Jan-91 35-0,000.00 350,000.00

In addition to to this investment in Pro-Rodeo, Inc.. Winthrop paid
$1.5 million, in september 1990. for an investment in Rodeo Partners.
• c) Investment in Coffea. International
d) Other lnveslment Payments:

"295,000.00 295,000.00
1) Armstrong's payments for Winthrop Realty Company,

Knightsbridge Guarantee Company. Knightsbridge
Company. and CCAH. Inc. 1,030.00 1,030.00
• 2) Bank One Cashiers Check dated 11/05/90

(Classified as an Investment expense)
3) Other payments classified as iTlVes1ment expenses
105,102.50
884.63
105,102.50
884.63
Subtotal: Other investment payments 494,017.13 1,142,738.31 1,636.755.44
e) Trading Losses
Losses experienced by Armstrong with
• investments through Merrill Lynch account
Total investment costs and expenses

Various 6,010.55
$500,027.68 $1,142,738.31
6,010.55·
$1.642.765.99
• B-07
---------_ .. _._-
•
Schedule 3-8
• APPUCAllON OF FUNDS
For the period January 1,1989 through June 15, 1991
Payment Payment
From CCA, Jr. From Affiliate
• :3 Acquisitions of Personal Property

B) Payments 10r Aspen Condo
b) Payments for 3 Stadium Boxes
$335,000.00
390,000.00
$335,000.00
390,000.00
c} Payments 10r improvements to Stadium Boxes 20,631.44 20,631.44
d) Payments associated with the purchase 01 vehicles 66,079.41 132,767.68 198,847.09
e) Purchase of fumiture 14,656.84 14,656.84
• 1) Purchase of artwork
Total acquisition of personal property

6,564.47
$87.300.72 $B78,399,12
6,564.47
$965.699.84
4 Charitable and Political Contributions:

a) Charitable Contributions:
American Cancer Society $33,050.00
• Cancer Research
Cattle Baron's Ball
Christian Service
10,000.00
4,200.00
10,000.00
Contributions to churches 68,500,00
Dallas Opera Ball 100,000.00
Family Gateway 5,Ooo.OD
Institute 10r Policy Innovation (IPI) 75,000.00
Multiple Sclerosis Society 275,800.00
St. Judes Research 5,000.00
Yellow Rose Gala 10,000.00
Other charitable contributions 7,151.68
Subtotal: Charitable contributions 603,701.68
• b) Political Contributions:
Beau Boulter 41,000.00-
Senator Buster Brown 80,000.00-
Doman for Congress 2,000.00
Kent Hance 54,000.00-
Warren Harding 10,000.00
• Rob Mosbacher
Senator David Sibley
Clayton Williams
60,000.00-
10,000.00
100,000.00
Other political contributions 4,000.00
SUbtotal: Political contributions 361,000.00.
• Total charitable and political contributions $964,701.68 $964,701,68
• 8-08
•
Schedule 3-C
• APPUCATJON OF FUNDS
Payment Payment
• 5 Payments for Professional Services:

Meadows Owens (Criminal Defense)
Meadows Owens (Criminal Defense)
Date
03/22/91
03/26/91
Account
25,000.00
700,000.00
Account Total
Meadows Owens (Criminal Defense) 04/04/91 10,000.00

Subtotal 735,000.00
Eppright & Golembeck 3,306.00
• Goodwin Canton
Other professionals
1,117.25
3,312.50
Total payments for professional services $742.735.75 $742,735.75
6 Loans and Advances to Third Parties:
• a) Payment to David McCall

b) Loans to McCalis
10/29/90
01/25/91
$30,000.00
600,000.00
$30,000.00
600,000.00
Total loans and advances to third parties $0.00 $630.000.00 $630.000.00
7 Credit Card Payments:

Payments on American El<press card $384,439.39
Payments on VISA card 80,959.28
Total credit card payments $465,398.67 $465.398.67
8 Repayments of Loans and Advances:

a) Repayments to Remington:
• ') Payment to Remington

2) Payment to Remington
04/30/90
05/31/90
3) Payment to Remington (Stadium Box Sales) 03/25/91
$8,225.00
3,nS.00
140,000.00
4) Payment 10 Knightsbridge (Stadium Bx Stiles) 04/19/91 100,000.00
5) Payment to Remington (Stadium Box sales) 04/19/91 25,000.00
Subtotal: Repayments to Remington 2n,OOO.OO
• b) Repayments to Julius D. SHafer

Monthly principal and interest payments during the
41,122.20
period January 1. 1990 through June 15, 1991
Total repayment of loans and advances $324.122.20 $324,122.20

(
• 9 Payments to Friends, Relatives & Employees:

Payments Characterized As Loans - -
Connie C. Annstrong, Sr. (Father) $5,121.00
Honey Gregory (Fiance) 42,500.00
J.J. Kissee (Remington Employee) 2,000.00
Terri Robbins (Remington Employee) 32,407.57
• Subtotal: payments characterized as loans 82,028.57
• 8-09
•
CONNIE C. ARMS-mONG, JR.
• Schedule 3-D
• APPUCATlON OF FUNDS
Payment Payment
• Date
(Payments to Friends. Relatives & Employees - Continued)
Payments Characterized As Gifts --
Account Account Total
Harriette Annstrong (Mother) (Medical Expenses) 37,186.67

Whitney FlSche (Noted as 'Miss Texas") 11.000.00
Nancye Meyer (Ex-Wife) 35,768.29
Punk Carter 10,000.00
• Susan Steffer (Friend)

Subtotal: payments characterized as gifts
23,400.00
117,354.96
Other Payments - -
Boone Armstrong (Brother) 8,000.00
Ed Ballard (Remington Employee) 5,316.12
• Christine Grambling
Nancye Myer
Patti Montague
(Hamilton Taft Officer)
(E)(-Wife)
(Remington Employee)
6,450.0n
34,533.32.
20,420.05
Tim McCall 4,800.00
EmieMcCoy (Remington Employee) 2,500.00
Terri Robbins (Remington Employee) 14,168.24
Subtotal: other payments 96,187.73
Total payments to friends, relatives & employees $295,571.26 $295.571.26
10 Household Expenses:
Cleaning $2,702.26
Domestic salaries & payroll taxes 56,121.89
• Flowers
Groceries and beverages
Interior decorating
10,329.70
22,883.75
15,354.74
~ndscaping 10,541.42
Reimbursements paid to other indrviduals 13,321.27
Repairs and maintenance 79,352.41
Telephone expenses 7,369,08
• Utilities
Other miscellaneous house expenses
40,734.21
15,379.12
Total payments for house expenses $274,089.85 $274,089.85
11 Taxes Paid:
• Income Taxes
Penalties paid to IRS
Payroll taxes paid
$75,042.84
3,543.00
3,639.67
$49,945.27 $124,988.11
3.543.00
3,639.67
Property taxes paid 7.408.08 7,408.08
Total paymenl of taxes $89,633.59 $49,945.27 $139,578.86
• B-10
•
Schedule 3-E
• APPUCATlON OF FUNDS
Payment Payment
• 12 Other Personal Expenses:

Payments to Identified Retailers -
Ashford- Trent (Manufacturing Jeweler) $19,714.36 $19,714.36

Neiman Marcus 15,979.20 15,979.20
Victor Costa (Woman's Boutique) 20,356.40 20,356.40
Tom James (Men's Clothier) 29,000.49 29,000.49
• Stanley Korshak
(Fumer: furs purchased as Christmas gifts)
Subtotal: Payments to identified retailers
98,391.64
183.442.09
96,391.64
183,442.09
Other Personal Expenses -

Automobile expenses 12,198.44 6,626.25 18,824.69
• Cash withdrawals
Child care and support payments
Dallas Cowboys tickets
175,13B.00
30,975.00
5,562.00
175,138.00
3(),975.00 -
5,562.00
Dues payments 12,n1.28 12,771.28
Payment to 'Fanuous" 6,250.00 6,250.00
Medical expenses 8,278.74 8,278.74
Rental property expenses (Identified as The Shelton) 27,874.38 27,874.38
Settlement paid to Epprighl & Golombeck 18,278.00 18,278.00
Triad Artists payment 12,500.00 12,500.00
Travel expenses 13,958.07 13,958.07
other payments characterized as gifts 27,760.81 27,760.81
Other miscellaneous personal expenses 64,393.28 78,122.67 14-2,515.95
• Total other personal expenses $599,380.09 $84,748.92 $684,129.01
Grand total of items 1 - 12 $4,600.491.41 $11,882,OB1.62 $16,488,573.03
Funds wfth uncertain applications (see note :2 a) 77,833.34 n,833.34

Payments to unidentified payees (see Note 2 d) 18,856.41 18,856.41
• Tolal application of funds $4.703.181.16 $11,882,081.62 $16,585,262.78
• B-11
• • .'
• NOTES TO SOURCE AND APPLICATION OF FUNDS
January 1, 1989 Through June 15.1991
•
Note 1: Sources of Information
The information in the Source and Application of Funds is based on documents provided to
• Frederick S. Wy1e, Trustee in Banlauptcy for HamiltDn Taft & Company by Larry D.
Gillilan, accountant for Mr. Armstrong. These documents include the following:
a) Report of 1989 Cash Received and Cash Disbursed

This report was compiled by Mr. Gillilan. Mr. Gillilan reconstructed this report
• during 1991 and it includes cash transactions in the following accounts:
1) Guaranty Federal Savings Bank checking account 66-0427617 for the period
May 31, 1989 (date of initial deposit) through December 31, 1989 (date of
report).
2) United Bank and Trust checking account 6105953 for the period January 1,
1989 (this account reflected a balance forward from 1988) through December
31, 1989 when this account reflected a balance of $332.96.
3} Texas American Bank checking account #0164590 for the period February 13,
• ]989 (date of initial deposit) through August 3, 1989 (date of closing

withdrawal) .
b) Transaction Reports for the period January I, 1990 through June 15. 1991.
These Transaction Reports summarize cash receipts and disbursements through five
• personal accounts kepf by Mr. Armstrong as follows:
1) Bank One checking account #102056389 for the period March 1, 1990 (date of
initial deposit) through June IS, 1991 (date of Transaction Report). This
account is noted as the "Personal" checking account.
• 2) Bank One checking account #102070992 for the period March 20, 1990 (date
of initial deposit) through June 15, 1991 (date of Transaction Report). This
account is noted as the "Expense" checking account.
3) Guaranty Federal Savings Bank checking account #6-0427617 for the period
• January 1, 1989 (inception of Transaction Report) through May 3, 1990 (date

of closing withdrawaJ).
• B-12
•
• •
• NOTES TO SOURCE AND APPLICAnON OF FllNDS
January I, 1989 Through JUDe 15,1991
• 4) Lindale State Bank chocking account #12-Q724-5 for the period March 7, 1990
(date of initial deposit) through June IS, 1991 (date of Transaction Report).
This account is DOted as the "Household" checking account.
• 5) Merrill Lynch Cash Management Account, #425-19374, for the period January
I, 1990 (inception of Transaction Report) through June IS, 1991 (date of
Transaction Report).
In addition to these reports, copies were provided of supporting documentation kept by Mr.
• Gillilan for each account during the 1990 through June 15, 1991 time period. This
supporting documentation typically included bank statements, bank reconciliations and
selected copies of issued checks, checks received and deposited, and various documents
supporting those receipts and disbursements. In some instances, this supporting
documentation included infonnation about 1989 transactions aJthough these early documents
were not complete.
Note 2: Discrepancies Observed In Reported Transactions:
a) Funds With UncerUiin Applications· $77,833.

Deposits for identified AffJ.1.iate payments to Mr. Annstrong amounting to $77 ,833,
• have not been identified in Mr. Armstrong's personal fmancial records.
Compensation paid by Remington and Hamilton Taft amounting to $37,697 and

reimbursed expenses paid by Remington of $40,136, for total payments of $77,833
were not identified as deposits in Mr. Armstrong's records. During 1989, Remington
• and Hamilton Taft's accounting records reflect compensation of $212,099 as having

been paid to Mr. Armstrong. However, Mr. Armstrong's 1989 records reflect
corresponding deposits of only $174,402, wbich represents a difference of $37,697.
In addition, Remington's accounting records reflect payments of reimbursed expenses
during 1989 of $65,812, whereas Mr. Annstrong's records reflect corresponding
deposits of only $25,676, which represents a difference of $40,136. The combined
• difference of $17,833 is presented in the Source and Application of Funds as funds
with uncertain applications.
• B-13
• • CONNIEC. ARMSTRONG, JR.
•
• NOTES TO SOURCE AND APPUCATION OF FUNDS
January 1, 1989 Through June 15,1991
• Other payments made by the Affiliated Entities to Mr. Armstrong have been traced to
deposits in his personal accounts. These traced payments include: a) the 1990 and
1991 compensation reported by Remington and Hamilton Taft; b} payments to Mr.
Armstrong classified as advances to Mr. Armstrong; and c} payments to Mr.
• Armstrong classified as repayments under notes payable. At this time, Remington's
reimbursements for 1990 and 1991 and Hamilton Taft's reimbursements for 1989
through 1991 have not yet been analyzed.
b) Missing 1989 transactions for the Merrill Lynch Cash Management Account.
The scope of Mr. Gillilan's report does not include 1989 ttaD&3.ctions in Mr.
• Annstrong's Merrill Lynch Cash Management Account, although this acwunt is
included in the 1990-91 Transaction Reports. Mr. Gillilan does identify 1989
transfers of $100,000 to the Menill Lynch account and a ttaDsfer of $50,000 received
from the Merrill Lynch account for net transfers to Merrill Lynch of $50,000.
The supporting documentation includes sufficient information on the 1989 transactions

in tbe Merrill Lynch account to reconstruct the 1989 activity in this account. This
analysis identifies 1989 interest earnings of $1,181 and expenditures for VISA card
payments of $29,136, withdrawals for service fees of $90 and withdrawals for losses
experienced on trading activity of $4,205. The remaining balance of $17,750
• represents the outstanding balance of cash and investments carried forward to the
January I, 1990 balance for the Merri]] Lynch account in the Tran&3.ction Report.
This reconstructed activity has been included in the Source and Application of Funds
under the relevant headings.
- c) Unidentified 1989 Deposits of $58,688.

• Several 1989 deposits amounting to SSB,688 are listed by Mr. Gillilan with no payor
or otber source of funds indicated. The largest unidentified deposit is a December 15,
1989 deposit to the Guarantee Federal Savings account in the amount of $33,288.68.
These deposits often represent the receipt of severnl checks, which makes it difficult to
identify them through comparison to payments by the Affiliated Entities.
• Consequently. these receipts are labelled as payments from unidentified sources

without distinction between third party or Affiliated Entity sources.
d) Payments to Unidentified Payees

Payments by Mr. Armstrong amounting to S18,856.41 have Dot been identified in the
Armstrong accounting records as to payee or classification of expenditure. These
• payments include a $5,000 wire transfer on April 18, 1991 and a May 20, 1991 cash
withdrawal for a cashier's check in the amount of $4,000.
• 8-14
•
•
• NOTFB TO SOURCE AND APPLICAnON OF FUNDS
• In addition to these unidentified applications, there was a November 5, 1990

withdrawal for a cashier's check in the amount of $105,102.50. This cashier's check
was classified in the Transaction Report as an "Investment Expense Other" and
consequently I it has been included in the Source and Application of Funds under the
• heading "Investment Costs and Expenses" at Schedule 3-A in Item 2 (d) (2).
Armstrong's personal accounting records also show cash withdrawals amounting to

$175,138 (See Schedule 3-E). Although the subsequent application of these funds is
not accounted for in the Mr. Annsoung accounting records, tbey are typic.alJy
• characterized in those records as personal expenditures or advances for reimbursed

business expenses. The cash withdrawals were typically in the amounts of $2,000 to
$7,000 each. The lMgest single cash withdrawal was for $15,000.
e) Unrecorded Expenditures (April 1991 Through June 1991) of $9,419.82.

The Transaction Repon indicates a June 15, 1991 balance in the Lindale checking
account (tbe Household account) of $9,467.15, whereas the last bank statement
provided for this account reflects a balance of $47.33 as of May 31, 1991. Furtber
evaluation of the Transaction Report indicates that checks written after mid-April 1991
had not been entered in the Transaction Repen. Consequently, the ending balance for
this account, as shown on the Transaction Report, overstates the ending cash balances
• by approximately $9,420. Since this account was used primarily for housebold
expenses, this difference has been included in the Source and Application of Funds as
expenditures for groceries and beverages under item #10 "Household Expense" on
Schedule 3-D.
Note 3: Affiliates' Characterization of Payments to Connie C. Armstrong, Jr~
• The transfers by Remington and Knightsbridge to Mr. Annstrong are recorded in the books
of these entities as either advances to Mr. Armstrong or as repayments of a Dote from
Remington to Mr. Armstrong for $1.5 million dated Febmary 9, 1990. The Remington and
Knightsbridge payments for the 1990-1991 period totals $4,232,299, as shown for item A-5
• (a) in Schedule 2. This amount includes cash payments to Mr. Armstrong's personal
accounts of $2,008,100 and payments to the Double C Ranch accounts of $367,250.
The note payable arose from a $9.8 million loan from Hamilton Taft to Winthrop Realty,
which Winthrop Realty in tum loaned to Mr. Annstrong, for the purchase of Double C
Ranch. Out of the total loan proceeds, $1.8 million was not required for the February 1990
• purchase of Double C Ranch and was instead transferred from Winthrop to Remington.
Remington accounted for these funds by crediting $300,000 against Mr. Annstrong's
• B-15
•
• •
• NOTES TO SOURCE AND APPLICAnON OF FUNDS
• employee receivable account and by executing the $1.5 million Dote to Mr. Armstrong.
Total cash payments of $1,937,100, consisting of $1,717,100 paid to Mr. Armstrong's
personal accounts and of 5220,000 paid to Double C Ranch accounts, were classified as loan
repayments. When the payments classified as loan repayments exceeded the amount of the
• loan during Marcb 1991, this excess was reclassified and combined with other advances
included in Mr. Armstrong's employee receivable account.
Note 4: Hamilton Taft & Company Acquisition Costs:
• a) PuTChase of Additional Hamilton Taft & Company Stock

On March 29, 1989, in settlement oftbe MaxPharma Litigation, Mr. Annstrong
acquired 100% of the capital stock of CR Acquisitions, Inc., which in tum
beneficially owned 100% of the capital stock of Hamilton Taft. Mr. Armstrong's
personal accounts reflect no payments associated with this acquisition.
On May 25, 1989 Hamilton Taft authorized a 1 for 1,000 reverse stock split of the
Company's common stock and set the par value at $1 per share. Hamilton Taft also
authorized 10,000 sbares of Class A preferred stock. Mr. Annstrong purchased
additional shares of common and preferred stock with two checks dated June 20, 1989
in the total amount of $33,000. These checks cleared the bank on July 24, 1989, the
• same day that the bank records a deposit of $33,000.
The July 24, 1989 deposit of $33,000 represents the proceeds of a loan from Dresdner
Investments, Inc., an Annstrong company which appears to have been used for about
six montbs in 1989. This loan was characterized in Dresdner Investment' s accounting
me stock". This loan receivable was subsequently
• records as a "loan to Chip for
transferred to Remington where it was included with other transactions categorized as
an employee receivable from Mr. Armstrong.
Dresdner Investments re:eived cash tnlnsfers from' Hamilton Taft of $3,248,000

during the period April 6, 1989 through July 31, 1989. These transfers represented
• the only material source of funds to Dresdner Investments.
• 8-16
•
• NOTES TO SOURCE AND APPLICATION OF FtJNDS
• b) Payment to Stanley Rosenberg - $615,OOS.U

On May 1, 1989, a cashier's check in the amount of $615,008.12 was purchased with
a Dresdner Investment check number 1002. As part of the MaxPbarma settlement
agreement, under which Mr. Armstrong acquired Hamilton Taft, he agreed to pay a
• promissory note, with a principal amount due of $600,000, owed by MaxPharma to
Mr. Rosenberg. The payor shown on this check: is titled ftDresdner Investment &
Capital Corp.; Hamilton Taft Operations".
This payment by Dresdner Investment was characterized as an advance to Mr.
• Annstrong. This receivable balance was subsequently tnnsferred to Remington where

it was included with other transactions categorized as an employee receivable from
Mr. Armstrong.
c) Legal Fees Paid By Remington - $232,730.19

On October 31, 1989, a journal entry on Remington's books reclassifies legal fees of
$232,730.19 as a receivable from Mr. Armstrong. These legal fees are characterized
as having been incurred prior to April 1989 and they are subsequently included as a
component of the Hamilton Taft acquisition costs.
d) Subsequent Disposition of Hamilton Taft Acquisition Costs
• The Hamilton Taft acquisition costs, which amounted to $880,738, were subsequently
transferred to CCAH Corporation, which later became Knightsbridge Company, Inc.
Knightsbridge (as CCAH) purchased the stock of Hamilton Taft from Armstrong in
March of 1990 for a promissory note of $880,738.
Note 5: Acquisition of Stiefer Property

• The Double C Ranch includes two parcels: a) a smaller Stiefer parcel; and b) a larger
Williams parcel. The William s parcel was purchased by Armstrong through a $9.8 million
loan from Hamilton Taft to Winthrop Realty Company. This purchase is accounted for in the
Transaction Report, but the 1989 purchase of the Stiefer parcel has not been accounted for in
• the 1989 accounting records provided to the Trustee.
The casb down payment for the Stiefer parcel appears to have occurred through a withdrawal
from Mr. Armstrong's Guarantee Federal Savings account in the amount of $72,426.04 for a
cashier's check payable to Smith County Abstract Co., on December 4, 1989. Mr.
Armstrong's supporting documents characterize this payment as for the "purchase of
• propeny".
• B-17
•
•
• NOTES TO SOURCE AND APPLICATION OF FUNDS
• Mr. Armstrong's supporting documents also include a Promissory Note in the amount of
$181,912. This note is signed by Connie C. Armstrong, Jr., as purchaser, on November 17,
1989 and is payable to Julius Doyle Stiefer as seller. This note is secured by a Deed of Trost
on 121.862 acres in Smith County, Texas. Mr. Armstrong made periodic payments of
• principal and interest to Mr. Stiefer during 1.990 and 1991 from his personal checking
account. In 1991, Mr. Armstrong requested the Trustee's consent, which was given, to
execute a deed in lien of foreclosure on.the Stiefer parcel, returning the property to
Mr. Stiefer.
Note 6: Cash Transactions Prior to March 29, 1989:

• Prior to Mr. Armstrong's acquisition of Hamilton Taft, loan proceeds represented the primary
source of funds in Remington, and Remington used Hamilton Taft funds to make payments
on these loans after Mr. Armstrong acquired control of Hamilton Taft.
During the period October 1, 1988 through March 31, 1989, Remington's general ledger
reflects cash receipts net of returned funds of $649,636. These receipts include loan proceeds
amounting to $646,009 which were comprised of: a) $300,330 from United Bank & Trust
loans; b) $185,000 from an October 28, 1988 Hamilton Taft loan; and c) $160,679 from Jim
Lindsey Insurance Agency loans. During this period, Jim Lindsey Insurance Agency was
paid $29,117.50 against the outstanding loan balances but there were no cash payments to the
• other lenders reflected in Remington's general ledger.
As described in Note 3 above, DresdDer Investments began to receive cash transfers from
Hamilton Taft on April 6, 1989. The cash transfers from Hamilton Taft in Dresdner
Investment's account were in some instances used to pay prior expenses of Remington.
• During April 1989, Dresdner Investments made payments of $303,353 against these prior
loan balances including an April 14, 1989, payment of $253,335 to United Bank & Trost and
an April 17, 1989 payment of $50,000 to Jim Lindsey IDsuJ:ance Agency.
Other prior expenses paid with Hamilton Taft funds include fees paid to Godwin, Carlton and
Maxwell, the law finn that represented Mr. Armstrong in his litigation against MaxPharma.
• Prior to March 31, 1989, no payments to Godwin, Carlton and Maxwell were made from
Mr. Ann strong,s personal accounts or from the accounts of Remington. The first payment
observed occurs on April 17, 1989 with a S130,000 payment to Godwin, Carlton and
Maxwell with a check drawn on the Dresdner Investment's cash account.
• Neither Remington nor Mr. Armstrong bad significant cash resources immediately prior to
the acquisition of Hamilton Taft. Remington began this period with a cash balance of
• B-18
• &
•
• NOTES TO SOURCE AND APPliCATION OF FUNDS
• $19,046 on October 1, 1988 and ended this period with a cash balance of $16,264 on March
31, 1989. The personal cash accounts identified by Mr. Annstrong reflect a beginning cash
ba.1aJlce of $529 on December 31, 1988 and a cash balance of $413 OD March 31, 1989.
During the first quarter of 1989, his receipts and disbursements were only $22,475 and
• $22.491, respectively. His receipts and disbursements increased substantially after his
acquisition of Hamilton Taft..
• 6-19
•
•
APPENDIX C
CREDITORS CLAIMS
•
•
•
•
SUMMARY OF CREDITORS CLAIMS
•
CONSOUDATED ESTATE
• Scheduled
Amounts
Proof of
Claim
Amounts
Maximum
Potential
Claims
Hamilton Taft Customer Claims $ 91,925,160.61 S 90,790,426.62 $ 95,123,932.26
• Hamilton Taft Employee Claims
Hamilton left Trade Claims

82,975.21
1,894,052.76
198,393.09
1,346,135.60
204,673.85
1,535,519.13
Other Hamilton Taf1 Claims 0.00 112,29B,nO.21 112,298,770.21
Remington Claims 505,932.59 574,288.22 970,665.90
Dresdner Enterprises Claims 10.007.25 46.992.66 47.332.57
TOTAL $ 94,418,148.42 $ 205,255,006.40 $ 210,181,093.92
TOTAL CLAIMS EXCLUDING SOLODOFF $100,151,093.92
•
DRESDNER PETROLEUM
• Scheduled
Proof of
Claim
Maximum
Potential
Amounts Amounts Claims
Dresdner Petroleum Claims 371,376.03 651.060.93 731,286.55
•
covshl.doc C-1
•
•
•
•
NOTES TO LISTS OF CLAIKS
1. The list of claims includes all claims and

amendments filed on or before October 18, 1991. The listing of a
• claim or amendment filed after the bar date of september 30, 1991
does not constitute a waiver of the trustee's right to object to
the claim on the ground that it was untimely filed.
2. nScheduled Amount n means the amount stated to be

owing to the creditor in the Schedules of Assets and Liabilities
• fired by the respective Debtors. The nproof of Claim Amount" is

the amount claimed to be owing by the creditor in a proof of claim
filed with the Court. If no- proof of claim was filed, the
"Maximum Potential Claim" is the Scheduled Amount. If a proof of
claim was filed, the "Maximum Potential Claim" is the "Proof of
Claim Amount", regardless of whether the proof of claim amount is
higher or lower than the Scheduled amount. The "Maximum Potential
• Claim" does not constitute any admission by the trustee that the
claim is allowable in the amount stated, and all objections are
reserved.
3. All duplicate claims have been eliminated for the

purpose of the list. If a proof of claim was filed against more
than one Debtor, it appears only once.
4. The list of claims does not include any

intercompany claims of any Debtor against another Debtor, or of
any non-Debtor affiliate against a Debtor.
• 5. The list of claims does not include any

classification as to priority.
•
NTS219. DOC C-2
•
•
CONSOLIDATED Blinn:
HAMIL1'ON ~
•
CUSroNBR CLAIMS
lJ1!c,
I
f\ll;~ljJ
MAXIMUM
o SCHEDULE~LI d ~'i{ PROOF OF CLAIM POTENTIAL
CREDITOR AMOUNT 5ioIl.·•• t}.
______________L AMOUNT ~ CLAIM
ACTION INSTRUMENTS CO., INC. $92,092.84 $96,654.31 $96,654.31

ADVO-SYSTEM, INC. $1,779,836.08 $1,796,288.32 $1,796,288.32.
AIR CABLE, INC. $24,966.22 $24,966.22
ALLEN FOAM CORPORATION $3,226.23 $~,226.23
• AMERICA WEST AIRLINES, INC.

AMERICAN MICROSYSTEMS, INC.
AMERICAN NUKEM CORPORATION
$834,725.41
$267,401.62
$32,79B.B5
$268,237.64
$32,798.85
$834,725.41
$268,237.64
$32,798.85
AMERICAN RESIDENTIAL ESCROW $849.68 S849.68
AMERICAN RESIDENTIAL MORTGAGE $156,040.21 $175,862.00 $1. 7S ,.862.00
ANALYTI KEM $31,184.29 . $31,184.29 $31,184.29
ARRAY TECHNOLOGY CORP. $35,106.01 $35,106.01
~~~DcrA~EP COIN AMUSEMENT CO $8,407.32 $10,218.74 $10,218.74
ATLAS HOTELS INC. $167,024.91 $166,607.00 $166,607.00
BALCOR PAYROLL COMPANY $12,211.47 $12,211.47
BARCLAY HOLLANDER CORP $3,617.50 S3 J 617.S0
BEEBE ORCHARD CO. $14,489.18 514,489.18
BLU~ CRC~5 & BLUE SHIELD OF TX $1,156,576.76 $1,257/~23.47 $1,257,623.47
BLUE GOOSE GROWERS INC. $274,931.33 $274.,931.33
• BLUE GOOSE GROWERS, INC.

BOARD OF TRUSTEES, STANFORD
BOSTON " MAINE CORPORTATION
$6,285.72
$845.20
$296,991.48
$6,285.72
$296,991.46
$845.20
BOSTON " HAINE CORPORTATION $5,572.54 $5,572.54,....-
BOYLE MIDWAY INC, $4,314.91 $4,314.91
BOYLE-MIDWAY $7,618.24 $7,618.24
BRINKMANN INSTRUMENTS $72,034.16 $72,034.16
BRUNSWICK SEAT COMPANY $1,096.B8 S1,096.88
BUD ANTLE, INC. 5229,477.87 $229,477.87
BUD ANTLE, INC. $890,046.07 $890,046.07
BW / IP INTERNATIONAL, INC. $370,697.23 $386,932.78 $386,932.78
C " R CLOTHIERS $324,523.13 5324,523.1.3
CALIFORNIA PACIFIC MED. CTR. $1,106,353.90 $1,102,264.05 $1,102,264.05
CARTEX CORPORATION $24,663.04
• CASTLE & COOKE
CASTLE & COOKE PROPERTIES
CASTLE & COOKE RESIDENTIAL
$1,889.86
$28,848.13
$74,588.42
$24,663.04
$1,889.86
$28,848.13
$74,588.42
CASTLE ~ OOO~, INC. $223,640.91 $223,640.91
CASTLE COOKE RETAIL, INC. $27,522.14 $27,522.14
CITY OF PIEDMONT $3,578.58 $3,578.58
CITY OF PINOLE
•
$2,843.17 $1,211.71 $1,221.71
CITY OF' PINOLE 53,232.54 $3,232.54
CLFu.~::!> CORPORATION S164,378.45 $164,332.89 $164,332.89
CLEVITE BRIDGESTONE CO. $2,733.94 52,733.94
COAST FEDERAL BANK $7,476.:29 $7,476.29
OOVIA PARTNERSHIP $1,793,303.81 $1,792,401.81 $1,792,401. 81
CYANOKEM $49,063.07 549,063.07 S49,063.07
•
U~GUSSA CORPORATION $746,680.7B $977,077.10 $977,077.10
DEL MANUFACTURING COMPANY $22,552.14 $22,851.14 $22,B51.14
DELAWARE SEAT COMPANY $14,905.38 $14,905.38
DELHI GAS PIPELINE CORPORATION $47,209.72 S50,209.72 $50,209.72
DIAMOND WALNUT GROWERS $5,986.84 $7,421. 34 $7,421.34
DOLE FOOD COMPANY, INC. $1,592,062.34 53,142,906.64 53,142,906.64
DONNELLEY RECEIVABLE INC. $108.26 $108.26
DUBLIN/SAN RAMON SRVCS DSTRCT
•
$45,012.29 $45,352.57 $45,352.57
ELECTRIC POWER RESEARCH INST. $117,950.60 $1.38,982.22 $138,982.22
ENSR CORPORATION DELAWARE 5710,506.19 5710,506.56 5710,506.56
02/19/92
C-3
•
•
COHSOLIDA'1'EJ) ESTATE•
HAMILTON TAP"l' CUSTOMER CLAIMS
MAXIMUM
• CREDITOR
SCHEDULED
AMOUNT
PROOF OF CLAIM
AMOUNT
POTENTIAL
CLAIM
FEDERAL EXPRESS CORPORATION 3.J, ....\, $30,432,796.91 $28,319,089.05 $28,319,089.05
FIRST CAPITAL LIFE INSRNCE CO. $127,193.73 $139,054.00 S 139, 054.00
GENSTAR STONE PRODUCTS COMPANY $518,023.25 $603,765.00 $603,765.00
GLENDALE ADVENTIST MED. eTR. $625,353.80 $625,709.80 $625,709. eo
• GUCKENHElKER ENTERPRISES, INC.

GUCKENBElKER OF TEXAS, INC.
H.D. HUDSON MANUYACTURI~G CO.
$95,403.19
$9,072.69
$100,556.49
$98,091.81
$9,474.00
$101,862.64
$98,09L81
$9,474.00
$101,862.64
HBO & COMPANY OF GEORGIA $420,317.80 $421,924.80 $421,924.80
HEALTHQUEST LTD. $203,803.91 $230,626.01 $230,626.01
J.E.G. FOODS, INC. $1,027.79 $1,027.79
JBB SPIRITS INC. $894.46 S894.46 $894.46
• JIM BEAM BRANDS CO.

KAYTEA ROSE, INC.
KEMPER SECURITIES GROUP
$157,862.79
S16/422~46
$1,078.73
$157,862.79
$16,814.98
$1,078.73
$157,862.79
$16,814.98
$1,078.03
LANAI COMPANY, INC. 5114,888.19 $114,888.19
LANAI COMPANY, INC. $3,550.91 $3,550.91
LONG BEACH CONTAINER TERMINAL $9,899.80 $9,786.79 $9,786.79
LUCASARTS ENTERTAINMENT co. $218,065.99 $231,857.32 $231,857. 32
• LUCASFILM, LTD.
KASON, NUGENT & COMPANY
MABON, NUGENT ,. COMPNAY
$21,432.34
$954,798.68
$2,000.00
$22,175.84
$985,407.53
$22,175.84
$985,407.53
$2,000.00
MAINE CENTRAL RAILROADS CO. $411.01 $411. 01
MCCUTCHEN,DOYLE,BROWN& ENERSEN $99,993.14 $100,959.51 S100,959.51
MCI TELECOMUNICATIONS CORP. $102.95 $102.95
HETROMEDIA COMPANY $60,685.10 $61,317.00 $61,317.00
HILLS COLLEGE $2,163.98 $11,508.89 $11, SOB. 89
MONROE SYSTEMS FOR BUSINESS $660,777.55 $650,777.55 $660,777.55
INC
MT. DIABLO HOSPITAL $146,033.47 $160,724.60 $160,724.60
NATIONAL DATA CORP. $68,911.30 $84,147.82 $84,147.82
NATIONAL DAT~ PAYMENT SYSTEMS $14,454.42 $14,454.42
NEC ELECTRONICS, INC. $285,282.60 $330,591.69 $330,591.69
• NEIMAN-MARCUS GROUP, INC.

NORTHLAND PLASTICS INC.
NORWEST PUBLISHING CO.
$2,686,12'7. 26
$7,234.95
$45,237.26
$553,250.70
$7,690.18
$553,250.70
$7,690.18
$45,237.26
NUKEH ACQUISITION CORPORAT!ON $79.62 S79.62
NlJJ(EH TECHNOLOGIES CORPORATION $24,700.27 $24,700.27 $24,700.27
OAHU TRANSPORT co., LTD. $2,209.85 $2,209.85
OAKLAND ATHLETICS BASEBALL CO. $90,365.04 $90,499.42 $90,499.42
• OBS FINANCIAL SERVICES

OCEANIC CONSTRUCTION COMPMY
PAYLESS SHOE SOURCE
$4,779.92
$38,607.53
$271,349.37 $1,052,856.30
$4,779.92
$38,607.53
$1,052,856.30
POLYTECHNIC UNIVERSITY $581,564.39 $640,704.98 $640,704.98
R.R. CONNELLEY & SONS COMPANY $4,243,286.64 $5,143,366.45 $5,143,366.561
RECKITT , COLEMAN INC. $1,B88,208.34 $2,471,860.77 $2,471,860.77
RECKITT & COLEMAN INC. 5246,309.17 $246,309.11
• RICHMOND WHOLESALE MEAT co.

RIVERSIDE SEAT COMPANY, INC.
RKO GENERAL INC.
$43,424.27
$16,828.57
S4,420.63
$45,222.87
$4,643.63
$45,222.87
$16,828.51
$4,643.63
RH MARKETING INc. $5,231.14 $5,231.14
ROCHESTER INSTITUTE OF TECH. S105,673.57 $105,673.5;
ROOT-LOWELL MANUFACTURING CO. $35,745.10 $36,340.00 $36,340.00
ROSS STORES, INC. 5701,843.46 5101,843.46 $701,843.46
• s & S CREDIT COMPANIES, INC.

S.D. WARREN CO.
$158,929.53
$3,206,607.68 53,206,607.68
$158,929.53
$3,206,607.68
02/19/92
C-4
•
•
CONSOLIDATED ESTATE
•
HAMILTON TAP'T CUSTOMER CLAIMS
MAXIMUM
• CREDITOR
SCHEDULED
AMOUNT
PROOF OF CLAIM
AMOUNT
POTENTIAL
CLAIM
SANDIA NATIONAL LABORATORIES $300, 000 • 00 $300,000.00

SCM CHEMICALS, INC. $206,809.05 $207,834.04 $207,834.04
SCM METAL PRODUCTS, INC. $49,347.49 $65,7B5.93 $65,785.93
SCOTT CONTAINER PRODUCTS GROUP $53,553.33 $53,553.33 $53,553.33
• SCOTT PAPER COMPANY

SCOTT PAPER COMPANY
SCOTT POLYMERS
$7,086,801.47
$44,471.87
$6,294.42
$7,086,801.47
$44,471.87
$6,294.42
$7,086,801.47
$44,471.87
$6,294.42
SCOTT WORLDWIDE, INC. S830.33 $830.32 $830.32
SIGNET ARMORLITE, INC. $50,105.99 $50,105.99
SIGNETICS COMPANY $6,212,016.45 $6,212,016.45 $6,212,016.45
SINAI HOSPITAL OF DETROIT $1,377,666.01 $1,567,207.70 $1,567,207.70
• SINAI MANAGEMENT SERVICES CO.

SITKA CORPORATION
SONY AVIATION SERVICES
$17,195.19
$12,047.50
52,539.67
$17,773.73
$12,588.32
$2,838.13
$17,773.73
$12,588.32
$2,838.13
SONY CAPITAL CORP. $982.72 $1,572.72 $1,572.72
SONY CHEMICAL CORP. OF AMERICA $967.24 $967.24 $967.24
SONY CLASSICAL $420.24 $1,010.24 $1,010.24
SONY CORPORATION OF AMERICA $414,189.15 $541,129.92 $541,129.92
• SONY USA INCORPORATED

SONY USA, INC.
50S CALIFORNIA DIVISION
$5,978.17
$1,590.29
$10,347.03
$2,366.56
$10,347.03
$2,306.56
$1,590.29
505 ENVIRONMENTAL TCHNLG, INC. -$675.53 $8,362.82 $8,362.82
SOSTAR $3,836.03 $6,306.52 $6,306.52
SOUTHLAND CORP. EHPLOYEES TRU. $178,993.18 $178,993.14 $178,993.14
·SPRINGFIELD SUGAR & PRDCTS CO. $351,368.47 $446,261.18 $446,261.18
SPRINGFIELD TERMINAL RAIL. CO. $51,705.83 $51,705.83
SPRINGFIELD TERMINAL RAIL. CO. $188,420.35 $296,014.77 $296,014.77
STANFORD UNIVERSITY HOSPITAL $3,512,722.32 $3,512,722.32 $3,512,722.32
STATE OF ARKANSAS $50,011.56 $50,011.56
SUN MICROSYSTEMS FEDERAL, INC. $23,660.37 $24,071. 78 $24.071.78
SUN MICROSYSTEHS OF CALIFORNIA $3,085.14 $3,070.86 $3,070.86
SUN MICROSYSTEMS, INC. $801,887.97 5191,227.64 $791,227.64
• SUN MICROSYTEHS EUROPE, INC.
SUN-MAID GROWERS OF CALIFORNI~
SUNBELT BEVERAGE CORP.
$528.51
$1,814.25
$235,422.69
$991.44
$9,163.44
$239,938.37
$991. 44
$9,163.44
5239,938.37
SUNSWEET GROWERS, INC. $13,141.02 $14,925.70 $14,925.70
SYBRON TRANSITION CORPORATION $8,671.81 $8,803.44 $8,803.44
T.O.S. rOODS, INC. $1.1,306.08 $12,235.50 $12,235.50
TANDEM COMPUTERS, INC. $1,960,838.18 $2,794,142.-85
•
$2-, 7g4, 142.85
TANDEM TELECOMMUNICATIONS SYST $40,708.11 S40,708.11
TEXAS OIL & GAS CORPORATION $30,5B1.22 $53,299.35 $53,299.35
THE ALL AMERICAN GOURMET CO. $830.74 $33,974.00 $3.3,974.00
THE CHRONICLE PUBLISHING CO. $1,088,532.47 $1,163,471.01 $1,163,471.01
THE COOPER COMPANIES, INC. SIB,316.15 $18,289.24 $18,289.24
THE EVB COMPANY $11,455.66 532,566.74 532,566.74
THE KENDALL COMPANY $1,018,911.86
•
51,320,460.00 $1,320,450.00
THE KENDALL COMPANY OF NEVADA $331.74 $331. 74
THE PULLMAN COMPANY $687,920.28 $736,111.75 5736,111. 75
THE STATE BAR OF CALIFORNIA $36,787.19 $36,787.19
THE VINTAGE CLUB $20,328.05 $23,613.57 $23,613.57
THERHALKEM $57,303.54 $57,303.54 $57,303.54
TRANS-ADVO SYSTEMS, INC. $11,169.40 $11,169.40
UNGERMANN-BASS, INC. 51,101,703.57
•
$1,030,844.77 $1,101,703.57
UNITED SAVINGS BANK $95,7.11.15 $96,675.75 $96,675.75
VALLEY FIG GROWERS $5,988.90 $7,227.26 $7,227.26
02/19/92
C-5
•
•
CONSOLIDATED BSnTE
•
HAMILTON TAPT CUSTOMER CLAIMS
MAXIMUM
• CREDITOR
SCHEDULED
AMOUNT
PROOF OF CLAIM
AMOUNT
POTENTIAL
CLAIM
VERBATIM CORPORATION 5391,051.78 $451,398.96 $451,398.96

WAHIAWA WATER CO., INC. $473.90 $473.90
WAIALUA SUGAR CO., INC. $46,407.38 $46,407.38
WAIALUA SUGAR CO., INC. $43,377.27 $43,377.27
• WASTE CHEM CORPORATION

WBP' TECHNOLOGIES
WILLIAM MARSH RICE UNIVERSITY
$22,385.78
$421.44
$34.26
$22,385.78 $22,385.78
$421- 44
$34.26
WILLIAM MARSH RICE UNIVERSITY $829,167.24 $829,201.50 $829,201.50
WINCtIP, INC. $980.19 $980.19 $980.19
WOODBRIDGE CORP. $88,031.42 $88,031.42
WOODBRIDGE ~AH FABRICATING $18,528.81 $18,528.81
• WOODBRIDGE HOLDINGS, INC.

WOODBRIDGE INOAC, INC.
. WOODBRIDGE SALES & ENGINEERING
$458.47
$30,799.40
$4,285.96
$209,353.81 $209,353.81
S30,799.40
$4,285.96
==============~=============== ================ =====:=;======== ================
Total: $91,925,180.61 $90,790,426.62 595,123,932.26
•
02/19/92
C-6
•
• , CONSOLIDATED ESTATE
•
HAMILTON TAP"l EMPLOYEE CLAIMS
MAXIMUM
• CREDITOR
------------------------------
SCHEDULED
AMOUNT
---------------
PROOF OF CLAIM
AMOUNT
---------------
POTENTIAL
CLAIM
---------------
AFLAK, USA $1,340.06 $1,340.06 $1,340.06
ARABIA, JAIME $558.68 $558.58 $558.58
ARMSTRONG, BOONE $7,078.58 $2,684.89 $2,684.89
ASDOURIAN, JEANNE
•
$724.78 $724.78 $724.78
BENIPAYO, CONSUELO $821. 76 $3,903.90 $3,903.90
BERNSTEIN, MATTHEW $708.77 $708.77 $108.77
BEWLEY, ELIZABETH LABRADO $1,606.80 $1,606.80 51,606.80
BLACHARSKI, DAN $1,003.89 $1,003.89 $1,003.89
BRISCOE, EDWARD E. $6,767.64 $71,397.01 $71,397.01
BOLDA, ERLINDA $574.74 $574.74 $574.74
BURKHARDT, DIANE $527.80
•
$527.B1 $527.80
BUSENBARRICK, DIANA $580.03 $643.28 $643.28
CALLAHAN, PATRICIA $160.35 $160.35 $160.35
CARRIZALES, JUAN-JOSE $334.88 $334.89 $334.89
CATAM., RODEL $335.62 $335.52 $335.62
CHANG, ALBERT $1,120.66 $1,120.66 $1,120.66
CHENG, MELODY $2,050.65 S2,050.65 $2,050.65
CONOVER, SALLY
•
$439.87 $439.87 $439.87
CORPUS, ANDREW $416.60 $416.59 $416.59
CROWE, CINDY $2,255.22 $2,255.22 $2,255.22
DANCEL, JUNE $561.07 $561.07 $561.0:J
DAVIS, ELIZABETH $341.60 $101.09 $101. 09
DAVISSON, ROBERT Sl,624.()8 $2,.986.56 $2,986.56
DE LA CRUZ, DANIEL $674.45 $674.45
DIMALANTA, VICTORIA $2,094.36 $2,094.36 $2,094.36
DUNN, DORA E. $1,709.85 $7,211.85 $7,211. B5
ERESE, JR., JOAQUIN $634.00 5634.00 5634.00
ESPIRITU, AUREA 5759.73 $1,670.13 $1,670.13
FELCZAK, JOHN 5500.68 $500.68
FIFIELD, THOMAS B. $634.94 $634.93 $634.93
FITCH, URSULA $1,583.33 51,583.33
• FITCH, URSULA
FONG, MICHAEL
FORESTI, JAMES
GAINES, BRIAN
$974.88
$1,117.83
$784.93
$974.88
$1,117.83
S784.93
$751.14
$974.88
$1,117.83
$784.93
$751.14
$751.14
GAYO, MICHELLE $470.64 $470.64 $470.64
GOFMAN, ROZALIA $1,946.10 $1,946.10 $1,946.10
HAR1US, DARRELL $298.64 $298.64 $298.64
• HOLLOWAY, FREDERIc
HUNPHRIES, THOMAS
JABJA, MCHHAT
KEEL, JAMES
$690.34
$2,366.80
$57.01
$1,623.93
55,90B.82
$2,366.80
$67.01
$1,623.92
$5,908.82
$2,366.80
$67.01
$1,623.92
KLEINBERG, JERRY $3,614.74 $3,674.74
KRAUTHAMER, KURT S2,000.00 $2,000.00
KWOK GLORIA $1,646.86 $1,646.86 $1,646.86
• LAFLIN, ROBERT
LANOIG, MICHAEL
LAU, STEVEN
LEE, CINDY
$744.03
$2,119.46
$453.44
$1,391.83
$16,000.00
$453.44
$744.03
$1,391.83
$16,000.00
$453.44
LILLEF, JOHN $1,189.50 $3,321.45 $3,321.45
HAGEE, ELIZABETH $1,643.53 $1,643.53 $1,643.53
MANLEY, PAUL $988.10 $988.10 $988.10
• HATHERS, LINDA
MENDOZA, ARACELI
MILLER, MARILYN
S288.54
$432.88
$38.86
$288.54
$432.88
538.86
$288.54
$432.88
$38.86
02/19/92
C-7
•
• , CONSOLIDATED ES~ATE
•
HAMILTON ':rAPT EMPLOYEE CLAIMS
• CREDITOR
SCHEDULED
AMOUNT
PROOF OF CLAIM
AMOUNT
MAXIMUM
POTENTIAL
CLAIM
MILLS, TOBY
---------------
$1,462.40
---------------
$1,462.40
---------------
$1,462.40
MONTANO, IRENE 5370.75 $370.75
MUNIZ, BETTE J. $378.13 $463.90 $463.90
• MURPHY, KATHLEEN
NG, DON
OBERHOLTZER, DONNA
PADAOAN, EDWIN
$564.14
$414.70
$884.84
$564.14
$884.84
$564.14
$414.70
SB84.B4
$387.54
$387.54 $387.54
PATERA, JENNIFER $411. 98 $411. 98 S411.98
QUIGLEY, JOHN $240.52 $240.52 $240.52
ROY, JOHANNA $1,011. 59 $2,09B.8a $2,098.88
• SAHAROFF, BASIL
SANCHEZ, LORENE
SARMIENTO, ROMULO
SCHORA, BARSHA
$620.14
$1.39
$453.98
$1,818.71
$620.14
$1,703.33
$11,715.17
$620.14
S1.39
$1,703.33
$11,715.17
SHEEHAN, RICHARD $1,298.45 $1,29B.45 $1,298.45
SIKIN, ROBERT $737.70 5737.70 $737.70
STRUTZ, STEPHEN $1,882.10 $1,882.10 $1,882.10
• SUSHANSKY, ANATOLY
TABANGCURA, TONY
TARTAKOVSKY, YEVGENIYA
TURLA, FLORA MIERKEY
566/.20
5793.00
5100.02
$667.20
$793.00
$667.20
$193.00
$100.02
$427.20 $427.20 $427.20
TUTT, GEORGE $346.37 $346.37 $346.37
TYLER, JAKES WM. $2,043.44 $14,501. 77 $14,501. 77
VIRAY, DIVIN~ (DEBBIE} $721.56 $721.56 $721. 56
WATSON, KATIE $848.00 $848.00 $B48.00
ZAMBRANA, LILLI~ $835.03 $835.03 5835.03
==========================;::; ==:=.============== ==========cz::::c:::== ==============:::
Total: $82,975.21 $198,393.09 $204,873.85
-r...-/";:: ::~~-J'.-: ~iJ{J.; L~'~:'~/'J
•
02/19/92
C-8
•
•
CONSOLIDATED BS~TE
HAMILTON TAl"T TRADE CLAIMS
•
• CREDITOR
SCHEDULED
AMOUNT
PROOF OF CLAIM
AMOUNT
MAXIMUM
POTENTIAL
CLAIM
191 ASSOCIATES $3,250.00 $3,250.00

191 ASSOCIATES $1,236.35 $1,236.35
ACCOUNTANTS, INC. $640.00 $640.00
• ALCATEL FRIDEN
ALHAMBRA NATIONAL WATER CO.
ALLNET COMMUNICATION SERVICES
APOLLO COMMUNICATIONS
$144.45
S148.10
$3,455.30
$119.57
$2,831.82
$144.45
$148.10
$2,837.82
$119.57 $119.51
APTITUDE TESTING $875.00 $875.00 $875.00
ARA CORY $426.56 $439.05 $439.05
ARTHUR ANDERSEN $1,598,525.00 $432,391.00 $432,297.00
• ASSOCIATED LIMOUSINES
ASSOCIATED LOOSE LEAF
AT&T
AT&T
$692.94
$851.33
$1,159.09
$55.31
$719.76
SBSl. 33
$779.76
$851.33
$1,759.09
$55.31
AT&T $542.28 $542.28
AT&T $1,475.39 $1,475.39
BANC ONE LEASING CORP. $7,390.40 $7,390.40
• BANK OF HAWAII
BEKINS
BOISE CASCADE OFFICE PRODUCTS
$1,360.25
$170.13
$571. 53
$1,360.25
5170.13
$571. 53
$1,360.25
$170.13
BROOK FURNITURE RENTAL $428.31 $10,210.94 $10,270.94
CALHOUN GUMP SPILLMAN & STACY $B,027.41 $8,027.47
CATAPULT $115.00 5115.00 $175.00
CELLULAR ONE $400.83 $400.83
COCORICO PATISSERIE $158.39 $158.39
COMPUTOWN $651.65 $651.65
CONTRACT OFFICE GROUP S134.84 $134.84
DUPLEX PRODUCTS, INC. S3,270.14 $3,270.14 53,270.14
EATON FINANCIAL $22,669.50 $22,669.50
ENTRE COMPUrER CENTER $11,822.75 511,822.75
EQUITABLE LIFE ASSURANCE $4,233.52 $5,660.40 $5,660.40
• EQUITABLE LIFE ASSURANCE SOC

ERNA PJU:SS
EVANS RENTS, INC.
$2,665.21
$1,264.42
$1,943.22 51,943.22
$2,665.21
$1,264.42
EXECUTIVE COURIER NETWORK $4.90 $4.90
EXPERTLY DONE $150.00 $150.00
FEDERAL EXPRESS CORP. $3,309.85 $3,222.35 $3,222.35
FIRST INTERSTATE BANCOR? - $306,126.58 $306,126.58
• FOX HARDWARE
GENERAL ELECTRIC CAPITAL CORP
GILTSPORjSAN FRANCISCO
$62.36 $62.36
$962.64
$6,620.96
$62.36
$962.64
$6,620.96
GOLDEN GATEWAY CENTER $B15.91 $815.91
GOODWIN, THOMPSON W. $700.00 $700.00
HAMILTON MANAGEMENT $30,000.00 $30,000.00
READQDARTERS COMPANIES $83.81 $83.81
• HI-TIMES DISCOUNT OFFICE

HYATT REGENCY S.F. HOTEL
INMAC
$211.05
$1,36B.07
$130.81
$2,131. 08
$211.05
$2,131.08
$130.81
INNOVATIVE OFFICE SYSTEMS $223.00 $223.00
INTELLIGENT ELECTRONICS, INC. $11,811.15 $11,811. 75
INTERNAL REVENUE SERVICE $6.44 $6.44
INTRANATIONAL COMPUTER $13,640.00 $11,640.00 511,640.00
• JOHN WILLIAHS & ASSOC.

KESTREL RECORDS MA1lAGEMENT
KIRK PAPEH co.
$24,204.22
$43.56
$365.41
$34,977.47 _ $34,977.47
543.56
$365.41
02/19/92
C-g
•
•
COHSOLIDATED ESTATE
•
HAMILTON TAP"l' nADE CLAIMS
MAXIMUM
• CREDITOR
SCHEDULED
AMOUNT
PROOF OF CLAIM
AMOUNT
POTENTIAL
CLAIM
LE REGENCY $530.00 $530.00

LEWIS ASSOCIATES $2,060.52 $2,140.77 $2,140.77
LIBERTY MUTUAL INSURANCE CO. $220.00 $220.00
LLOYD'S COMPUTER SERVICE $112.50 $112.50 $112.50
• LONG & LEVIT

LOOKS FURNITURE LEASING
LVG PROPERTIES
$1,670.30
$220.00
$14,716.50 $14,716.50
$1,670.30
$220.00
MEADOWS OWENS COLLIER $1,033.91 $1,033.91
HINDENS STATIONERS S899.34 $973.72 $973.72
MOORE BUSINESS PRODUCTS $45.00 $45.00
MORTGAGE SECURITY ADVISORS $340,000.00 $340,000.00
• MUNICIPAL MOTOR OFFICER

NEW MEXICO TAX & REVENUE
OFFICE CLUB
$2,000.00
$17.42
$54.06
$2,000.00
$17.42
$54.06
ONE HARKET PL~ZA $88,622.38 S88,822.38
ONE MARKET PUZA $1,433.95 $1,433.95
PA BOARD OF FINANCE & REVENUE $575.11 $575.11
PACIFIC BELL $27.91 $27.91
• P~CIFIC BELL
PACKAGED BUSINESS
PILLSBURY, MADISON & SUTRO
$10,451.25
$6,497.00
$10,143.49
$6,497.00
$72,862.69
$10,143.49
$6,497.00
$72,862.69
PITNEY BOWES $104.37 $104.37
PLANT DESIGN $176.55 5176.55
PROFESSIONAL TRAINING ~SSOC $4.00 $4.00
RAYZBERG, DDS, ALEXANDER G. $3,600.00 $3,600.00
REMEDY TEMP, INC. $662.39 $662.39
ROBERTS OF SAN FRANCISCO $117.00 $2,97B.73 $2,978.73
S.F. NEWSPAPER AGENCY S128.40 $728.40 $728.40
SAN FRANCISCO TOM SNACKS $340.08 $340.08
SECURITY PACIFIC NATIONAL BANK $0.00 50.00
SNET $24.71 $24.71
SOUTHERN BELL $89.60 $74.62 $74.62
• STANSBURY BORAGINE & Asse
STATE BOARD OF EQUALIZATION
STATE OF CALIFORNIA
$1,302.40
$500.00
$1,919.17
$1,302.40 $1,320.40
$500.00
$1,919.17
TAB PRODUCTS CO. $58.01 S58.01
THE MARK HOPKINS HOTEL $971.65 $971.65
THE VERY LAST WORD $266.43 $266.43
TRANSAMERICA INS. FINANCE $25,161. 67 $20,350.90
•
$20,350.90
TRANSPORTABLE SOFTWARE $3,897.58 $3,897.58
UARCO, INC. $166.62 $166.62
OS SPRINT $1.87 S1.87
WLCAN BINDER & COVER $84.40 584.40
WEINBERG, DORON $16,000.00 $16,000.00
WESTCORP SOFTWARE SYSTEMS, IN. $549.9? $549.97
•
WORD POWER $293.92 $293.92
============================== ==c============ l::===::::==========
Total: $1,894,052.76 $1,346,135.60 51,535,519.13
•
02/19/92
C-10
•
•
COHSOLIDATED BSTATE
OTHER RANILTON TAFT CLAIMS
•
• CREDITOR
SCHEDULED
AMOUNT
PBOOF OF
AMOUNT
CLAI~
MAXIMUM
POTENTIAL
CLAIM
SECURITY PACIFIC NATIONAL BANK $2,268,770.21 52,268,110.21

STEVEN SOLODOFF 5110,030,000.00 5110,030,000.00
~r:::=======~==== ::::::====::2==::===== :::CCE===::;===~:=:===
• Total: . $0.00 $112,29B,I'70.21 5112,298,770.21
•
02/19/92
C-'1
•
•
CONSOLIDATED BS!rATB
REMINGTON CLAIMS
•
•
MAXIMUM
SCHEDULED PROOF OF CLAIM POTENTIAL
CREDITOR AMOUNT AMOUNT CLAIM
AMELIA MARTIN TRAVEL $2,834.89 $2,218.89 $2,218.89

AMERICAN EXPRESS $43.33 $43.33
ARENA PROMOTIONS $39.00 $39.00
ARTS" FLOWERS $286~32 $286.32
• AT'T
BALLARD. WILLIAM E.
BANK ONE, TEXAS, NA
$67.91
$9.40
$273,015.97
$61.91
$9.40
$273,015.97
BITUMINOUS CASUALTY CORP. $8,164.00 SI8,OBO.00 S18,080.00
CALUOUW,GOHP,SPILLHAN & STACEY $254.50 $254.50
CCAJ $322.48 $322.48
CRASE THIRD CENTURY LEASING $104.74 $104.14
• CITY WIDE DELIVERY

CLKVELAHD, GENE
CONNIE C. ARMSTRONG, JR •
$251. 00
$6,411.33
$1,661. 52
$251.00
$1,661. 52
$6,411.33
CUMMINS-ALLISON CORP. $112.95 $112.95
DALE SIMPSON ~ ASSOCIATES $4,937.79 $4,937.79
DALLAS MORNING NEWS $1,494.33 $1,494.33
DALLAS TIMES HERALD $22.50 $22.50
• DELUX BUSINESS FORMS

EATON FINANCIAL CORP.
EPPRIGHT & GOLOMBECK
$111.09
$113.66
$1,723.60
$3,565.46
$111.09
$3,565.46
$1,723.60
EQUITABLE LIFE ASSURANCE $224,074.90 $224,074.90
EVANS PRINTING COMPJI.N¥ $147.22 $147.22
EVANS PRINTING COMPANY $197.12 $225.05 $225.05
EXCELSIOR LEGAL SOUTHWEST $87.63 $87.63
EXECUTIVE COFFEE SERVICE $326.78 $326.78
FAIRCHILD COMMUNICATIONS $5,604.98 S3 I 691. 40 $3,691.40
FEDERAL EXPRESS $645.00 $645.00
FOUR SEASONS HOTEL $43,704.78 $43,704.78
GROCHOWSKI, GREG SI,10B.83 51,108.83
HUMPHRIES, THOMAS 552.60 $52.60
INNOVATIVE LEASING $3,951.47 53,951.47
• INNOVATIVE OFFICE SYSTEMS

JET EAST, INC.
JOHN F. WILLIAMS & ASSOC.
$1,374.48
$44,968.85
$7,925.10
$1,374.48
$44,968.85
$7,925.10
LANIER WORLDWIDE, INC. $34.61 $34.61
LINCOLN NATIONAL LIFE INS. CO. $41,536.59 $41,356.59
LLOYD'S COMPUTER SERVICE $150.00 $150.00 5150.00
LONG" LEVIT $24,984.73 $126,437.35 $126,437.35
• LOOKS FURNITURE LEASING
tUSK " ASSOCIATES PERSONNEL
MARGULIES COMMUNICATIONS
$405.29
$8,750.00
$2,500.00
$8,750.00
$405.29
$B,750.00
$2,500.00
MATTKEW BENDER COMPANY $437.65 $431.65
MCCALL, MCBRIDE, ROBERTS $29.30 $29.30
KCCOY, ERNEST S. $3,461. 50 $3,461. 50
• KCCOY, ROBERT
MCCOY, ROBERT
KERRILL LYNCH PIERCE
NAIL, HEATHER
$69.38
$1,616.74
$5.20
$69.38
$600.00
$5.20
$69.38
$600.00
$1,616.74
$5.20
OFFICE SUPPLY CO., INC. $668.53 $668.53
OIL , GAS JOURNAL $95.00 $95.00
PAYCHEX $228.18 5228.78
PEAT HARWICK MAIN & CO
• PILLSBURY, MADISON & SUTRO
PITNEY BOWES
$39,000.00
$87.68
SS8, 841. 00
$37,512.66
$58,841.00
537,572.66
581.68
02/19/92
C-12
•
- ----- - - - - --- _._- - -- -------- - - - - - - - - -
•
CONSOLIDATED BSTATE
REMINGTON CLAIMS
• MAXIMUM
• CREDITOR
SCHEDULED
AMOUNT
P:ROOF OF CLAIM
AMOUNT
POTENTIAL
CLAIM
PROFESSIONAL SECURITY COMPANY $75.78 575.78

ROSADO, ROSA A. $1,052.32 511,052.32
SIERRA SPRING WATER $33.25 $33.25
SOUTHWESTERN BELL MOBILE $827.45 $827.45
• STRASBURGER & PRICE

TEXAS EMPLOYMENT COKHI S5 ION
THE GASS COMPANY
$90.00
$395.00
$275.55
$399.51
$275.55
$399.51
$395.00
THE MANSION $363.86 $2, Sal. 72 $2, SOL 72
THE HARK HOPKINS $2,221.83 $2,221.83
THE TRAWLERS $1,600:00 $1,600.00
THOMPSON & KNIGHT $18,797.99 $25,859.01 $25,859.01
• TODAY'S TEMPORARY
TRANSAHERICA INSURANCE
TU ELECTRIC
$249.10
$2,481.33
$97.28
$249.10 $249.10
$2,481. 33
$97.28
WALTERS, KIM $22.36 $22.36
WELSH'S GREAT CAKES, INC. S18.00 5118.00
WHEEL COMPONENTS, INC. $2,126.00 $2,126.00
ZENO SYSTEMS $64.95 $64.95
• Total:
===============
$505,932.59
============e====
$574,288.22
=;;::=::!:::::=========
$970,665.90
•
02/19/92
C-13
•
•
CONSOLIDArED ESTATE
DRESDHER ENTERPRISBS CLAIHS
•
•
MAXIMUH
SCHEDULED PROOF OF CLAIM POTENTIAL
CREDITOR AMOUNT AMOUNT CLAIM
AMERICAN EXPRESS $17,594.90 $17,594.90

ARLINGTON UTILITIES $61.90 $61.90
BRACEWELL & PATTERSON $259.75 $259.75
COUNTY OF DALLAS $643.19 $643.19
• FOREMOST TUBULAR PDOnuCTS
FOREMOST TUBULAR PRODUCTS
FOSTER, LEWIS, LANGLEY, ET.AL.
$2,831. 36
$5,535.98
5174.35
$2,831. 36
$6,171.62
$174.35
$2,831. 36
$6,171.62
GREENLEAF LAWN MAINTENANCE 5225.00 $225.00
HARWIN, MR. & MRS. ROBERT B. $1,300.00 $3,800.00 $3,800.00
THIRD CENTURY INC $2,827.98 $2,827.98
TV ELECTRIC $53.01 $53.01
• UNITED BANK & TRUST
Total:
========~===:;====
510,007.25
$12,6B9.51
=====~=====::r:====
$46,992.66
$12,689.51
================
$47,332.57
•
02/19/92
C-14
•
•
•
DRESDNBR PETROLEUM CLAIMS
MAXIMUM
• CREDITOR
SCHEDULED
AMOUNT
PROOF OF CLAIM
AMOUNT
POTENTIAL
CLAIM
A & B ELECTRONICS, INC. $324.52 $324.52

AAA TUBING TESTERS, INC. $6,688.00 56,688.00 $6,688.00
ABLE COATING SYSTEMS, INC. $1,136.63 $1,136.63
ACE TRANSPORTAION, INC. $2,989.16 $2,089.16
• ARCO OIL & GAS COMPANY

AT&T
ATCO SERVICES, INC.
$900.00
$49.71
$948.36
$900.00 $900.00
$49.71
$948.36
B.K. DRILLING FLUIDS $7,049.09 57 ,049. 09
BERGSTEIN OILFIELD SRVCS, INC. $348.79 $348.79
BRADLEY SUPPLY COMPANY $283.84 $283.84
CHAMPION TECHNOLOGIES $570.03 $570.03 $570.03
• CITATION OIL & GAS CORP.
CLARK COMMUNICATIONS, INC.
CLINTON, G. C.
$1,043.57
$873.78
$22,798.18
$1,595.88
$1,037.83
$23,023.98
$1,595.88
$1,037.83
$23,023.98
COLORADO RIVER HNCPL WTR CST $14,846.65 $14,846.65 $14,846.65
COKHERCIAL RADIO SERVICE $151. 56 S151. 56 $151. 56
D&H TRANSPORTS, INC. S1,188.60 $1,188.60 $1,188.60
D.F.W. DEVELOPMENT CORP. $660.00 S660.00 $660.00
• DALE HARTIN & SON TIRE

DANIEL, GLENN E.
DAVIDSON, ROGER E.
$116.73
$100.00
51. 56
S1l5.00
$1,350.00
$3,300.00
$115. DO
$1,350.00
$3,300.00
DRINNON, STEPHEN W. $970.97 $1,002.48 $1/002.48
DST SYSTEMS, INC. $107.50 $107.50
E.L. FARMER & CO. $995.12 $995.12 $995.12
EASTMAN, TRUSTEE, FRANK A. $3.26 UNKNOWN UNKNOWN
ELKCO WlRELINE SERVICES 52,900.00 $2,900.00 $2,900.00
ENERGY ELECTRIC CONTRACTING $1,309.04 $2,431.42 S2,431-42
FEDERAL EXPRESS $114.00 $114.00
FIRESTONE SERVICES $48").65 S487.65
FLO C02, INC. $4,213.85 $4,213.85
FOWLERS TEXACO SERVICE STATION $3,341.86 53,342.06 $3,342.06
G & L TOOL COMPANY $1,025.43 $1,025.43 $1,025.43
• G&W DANIEL CONSTRUCTION CO
GOODWIN, THOMPSON W.
GOOL OFFICE EQUIPMENT CO.
$301.50
$1.05
S42.02
$301- 50 5301.50
$1.05
$42.02
GRAUKAN'S, INC. $366.38 $366.38
H & P RENTALS $1,218.75 $1,218.75 $1,218.75
HALLIBURTON LOGGING SERV., INC $5,711.54 $5,711. 54
HALLIBURTON SERVICES $37,688.78 $31,977.24 $31,977.24
• HANOVER COMPRESSOR CO.
HARDING WELL SERVICE CO.
HAWKIN'S DOZERS
$3,899.89
$2,461. 42
$19,787.50
$11,869.00
$2,461.42
$19,787.50
$11,869.00
$2,461. 42
$19,787.50
HENDERSON, CHARLES Ii. $1,838.73 $1,889.61 $1,889.61
HIGHLAND PUMP COMPANY $12,861.73 $14,341.11 S14,341.11
HINSLEY, MICHAEL $1,074.53 $1,074.53
INSTRUMENT MAINTENANCE CO. $1,447.99
•
$1,447.79
JIMCO ELECTRONICS AND $2,749.79 $2,505.16 $2,505.16
JOHNCO SALES COMPANY $4,930.72 $8,498.70 $8,498.70
JOHNSON, LLOYD E. $3,297.70 $5,407.56 $5,407.56
K-l TANK RENTALS $1,012.14 $1,012.14
LAIN WELL SERVICE COMPANY $22,631.38 $22,736.37 $22,736.37
LANE, JR., SAM $1.05 $1. as
LAUDERHILK, D.V.N., BOBBY $158.80
• LEAMCO-RUTHCO
LIBERTY ANCHOR SERVICE
$1,968.56
$546.50
$158.80
$1,968.56
$546.50
02/19/92
C-15
•
• • DRESDlmJl PETROLJroM CLAIMS
• CREDITOR
SCHEDULED
AMOUNT
PROOF OF CLAIM
AMOUNT
MAXIMUM
POTENTIAL
CLAIM
M & P DRILLING SERVICE INC. $43,688.25 $51,387.38 $51,387.38

MDH CORPORATION $136.32 $136.32
MICKLER, JAMIE $970.97 $1,002.48 $1,002.48
KIDWEST ELECTRIC COOP $458.&2 $448.07
•
$448.07
MIKE BYRD CASING CREWS $1,345.72 $1,345.72 $1,345.72
NALCO CHEKICAL COMPANY $11,818.80 $19,895.47 $19,a95.47
NATIONAL OIL WELL $6,943.50 $7,367.51 $1,367.51
NORTHGATE COMPUTER SYSTEMS $310.00 $310.00
OFPlCEKART SUPERSTORE $370.48 $370.48
PACKER SALES & RENTAL, INC. $2,075.29 $2,075.29
•
PARDHER WELL SERVICE, INC. $12,537.46 $12,537.46 512,537.46
PENA WELDING $11,469.70 S10,707.39 $10,707.39
PERMAIN OIL FIELD ELECTRIC $372.14 $372.14
PETROLEUM INFORMATION $157.92 $157.92
PETROLEUM INFORMATION $363.43 $520.99 $520.99
PETROWARE SYSTEMS, INC. $2,649.96 $2,049.96
POLLARD CHEVROLET $154.92 $154.92
PORTER, WILLIAM s . $2.61 $300,000.00 $300,000.00
• PREFERED PACKERS, INC.
PRIDE PETROLEUM SERVICES
PRO WATER SERVICE
$716.81
$B08.12
$537.50
5716.81
$808.12
$537.50
RALPH H. VINEY & ASSOCIATES $4,495.00 $4,495.00
ROBERTS AUTO SUPPLY $158.31 $158.31
ROTARY OIL & GAS CO., INC. $7,036.47 $7,928.97 $7,928.97
S&S HOT OIL SERVo INC. $242.50 $242.50 $242.50
SCOTT FUEL, INC. $264.36 $262.76 $262.78
SHELF ENERGY $7.16 S7 .16
SMALL FISHINC & RENTAL S10,828.75 $10,828."15
SOUTHWEST TOOL COMPANY $1,774.98 $1,774.9B $1,774.98
STEPHEN J. KROUGH & ASSOCIATES $170.00 $170.00
STONEWALL ELECTRIC CO. S2,508.04 $2,508.04 $2,50B.84
• SUBSURFACE SPECIALTY COMPANY

SUNWEST MUD COMPANY
TEXAS UTILITIES ELECTRIC CO.
TRE REEVES COMPANY
$13,614.37
$5,519.62
$13,548.81
$7,049.09
$950.79
$13,548.81
57,049.09
$950.79
$5,519.62
THE TRAVELERS INSUAANCE $853.00 $853.00
THE WESTERN COMPANY OF $3,681.58 $3,691.58
TRAC POWER RENTAL $107.25 $107.25 $107.25
• TRANSAHERlCA INSURANCE
TU ELECTRIC
TURNER BIT SERVICE, INC.
TWO DRAW WELDING
$3,365.40
$10,280.64
$458.49
$B50.00 $850.00
$3,365.40
$10,280.84
$458.49
S8S0.00
TYRELL REAL ESTATE $1,600.00 $1,600.00
WEAVER SERVICES, INC. S1,549.68 $1,649.88
WES-TEX TELEPHONE COOP $301.15 $301.75 $301. 75
•
WEST TEXAS WELDERS SUPPLY $56.08 $56.08
WIGGINS, MARK $100.00 $9,999.00 $9,999.00
WINSTEAD, SECHREST & MINICK $9,534.33 $9,534.33
=======~=~a======~==~=====;;== ::====:=====.:::::::::== =============== ==========;=::::====
Total: $371,376.03 $651,060.93 $731,286.55
•
02/19/92
C·16
•
1
GILMORE F. DIEKMANN
PATRICIA H. CULLISON
2
BRONSON, BRONSON & McKINNON
505 Montgomery street
3
San Francisco, California 94111-2514
Telephone: (415) 986-4200
4
Attorneys for Plaintiff

5
FEDERAL EXPRESS CORPORATION
6
8
UNITED STATES DISTRICT COURT
9 NORTHERN DISTRICT OF CALIFORNIA
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FEDERAL EXPRESS CORPORATION,
Plaintiff,
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COMPLAINT FOR INJUNCTIVE
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20 PARTIES
21 1. Plaintiff FEDERAL EXPRESS CORPORATION ("Federal
22 Express ll ) is a corporation organized and existing 'under and by
23 virtue of the laws of the state of Delaware, and maintains its
24 principal place of business in Memphis, Tennessee.
25
2. Plaintiff is informed and believes and thereon alleges
26 that Defendant HAMILTON TAFT & COMPANY (tiHamilton Taft ll ) is a
27
corporation organized and existing under and by virtue of the
28 laws of the state of California and maintains its principal place
COMPLAINT FOR INJUNCTIVE RELIEF

1
of business in Texas~
3
II.
A
JURISDICTION AND VENUE
5
3. This is an action for breach of contract, breach of
6
fiduciary duty, and breach of agency relationship arising, inter
7
alia, under the California civil Code section 2322 et seq. The
8
amount in controversy exceeds the sum or value of Fifty Thousand
9
Dollars ($50,000) exclusive of interest and costs. The
10
jurisdiction of this Court is invoked pursuant to 28 U.S.C.
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GENERAL ALLEGATIONS
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Count One
20
(Breach of Contract)
21
5. Plaintiff realleges and incorporates by reference as
22
though fully set forth herein each and every allegation contained
23
in paragraphs 1 through 4 of this Complaint.
2A
6. In December of 1989 Federal Express entered into a
25
payroll tax service contract with Hamilton Taft. Pursuant to
26
this agreement, Federal Express would wire transfer its employee
27
payroll taxes to Hamilton Taft. Under the contract Hamilton Taft
28
was then obligated to make disbursements to the appropriate

2
1
taxing authorities on behalf of Federal Express including the
2
IRS, and state and local taxing agencies. As consideration for
3
performing this service, Hamilton Taft had the use of Federal
4
Express' money from the time of its receipt until the time of its
5
disbursement to the appropriate taxing authority.
6
7• Federal Express has performed all of its obligations
7
under the contract by promptly delivering to Hamilton Taft all
8
appropriate payroll tax summary reports and payroll tax funds.
9
Plaintiff has fully performed all contractual obligations except
10
where prevented by breach of defendant.
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8. Plaintiff is informed and belie~es and thereon alleges
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transferred for that purpose, the money would be held for an
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additional 30 to 90 days. Plaintiff is informed and believes and
16
thereon alleges that in some cases defendant then used a
17 different client's incoming funds to pay Federal Express taxes
18 and any federal or state taxing agency penalties for late
19 payments.
20
9. Plaintiff is informed and believes that in other cases,
21
Federal Express taxes simply were not paid, and penalties may be
22
accruing.
23
10. Defendant has further breached the contract by not
24
providing original tax receipts evidencing the tax payments as
25
requested by plaintiff.
26
11. As a result of defendant's breach of contract plaintiff
27
has been damaged in excess of $50,000. In order to discovery the
28
true extent of its damages plaintiff is in need of information

3
1
from the defendant regarding payroll taxes paid and money
2
currently owed to the appropriate taxing authorities.. Such
3
information is within the exclusive control of the defendant and
A-
has not been made available to the plaintiff as requested.
S
6
count Two
7
(Breach of Fiduciary Duty)
8
12. Plaintiff realleges and incorporates by reference as
9
though fully set forth herein each and every allegation contained
10
in paragraphs 1 through 11 of this Complaint.
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the wages of its employee. Plaintiff, as trustee of these funds,
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duty to the plaintiff to transmit these funds to the appropriate
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had a fiduciary duty to invest these funds as a reasonably
20
prudent investor investing his own money would have done so as
21
not to jeopardize the principle. On information and belief
22
plaintiff alleges that by investing in high risk non-liquid
23
loans, defendant has breached this fiduciary duty.
24
25
Count Three
26
(Breach of Agency Relationship)
27
15. Plaintiff hereby realleges and incorporates by
28
reference as though fully set forth herein paragraphs 1 through

4
1
11 of this Complaint.
2
16. Pursuant to the written payroll tax service contract
3
entered into between the defendant and plaintiff, defendant
.4
became the agent of plaintiff.
5
17. Defendant consented to the creation of this
6
relationship by agreeing to accept payroll tax money from the
7
plaintiff and deposit such money on behalf of the plaintiff in
8
the appropriate amounts and manner on or before the statutory
9
deadlines as herein alleged.
10
18. In consideration of i~s entering into an agency
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loyalty required defendant to pay the payroll tax funds owed by
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manner, and to refrain from administering the payroll tax funds
20
in a manner harmful to the interest of the plaintiff, includIng
2]
imprudent investments, or investments which might expose the
22
plaintiff to taxing authority liability.
23
20. Also pursuant to its agency relationship with the
24
plaintiff, defendant owed a duty to disclose promptly upon demand
25
by the plaintiff all documents, including tax receipts, relating
26
to the defendant's administration of the plaintiff's payroll
27
account.
28
21. Defendant has breached its agency relationship by

5
1
failing and refusing to render to Federal Express, upon its
2 demand, an accounting of its fund.
3 22. Defendant's breach of its agency relationship has
4
caused plaintiff damages in an amount to be specifically
5 ascertained at trial but which is presently alleged to be in
6 excess of $50,000.
7
8 Count Four
9
(Injunctive Relief)
10 23. Plaintiff hereby realleges and incorporates by
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injunctive relief herein from destroying or otherwise disposing
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20 other information regarding the transfer and use of funds,
21 plaintiff will suffer immediate and irreparable injury for which
22 there is no adequate remedy at law herein.
23 WHEREFORE, plaintiff prays for judgment against defendant as
24 follows:
25 1. For preliminary injunctive relief restraining or
26 otherwise preventing defendant from destroying tax receipts
27
and/or other information regarding the transfer of payment of
28
plaintiff's payroll taxes as alleged, pending trial;

6
1
2. For preliminary injunctive relief ordering defendant to
2 cease using plaintiff1s payroll tax funds as part of a J1 p onzi
3
scheme", pending trial;
3. For a temporary restraining order enjoining defendant
5
from destroying tax receipts and/or other information regarding
6
plaintiff's payroll taxes; and
7
4. For an order mandating the production of tax receipts
8 and/or other information in control of the defendant regarding
9 the payment and transfer of plaintiff's payroll tax funds; and
10 4. For damages for the acts herein alleged in accordance
11 with proof ..
12
13 JURy DEMAND
1.4
Plaintiff Federal Express Corporation hereby makes demand
15 for jury.
16
17 Dated: March 13, 1991

18 BRONSON, BRONSON & McKINNON
BY:Qz(~~
19
20
PATRICIA H. CULLISON
21
22
23
24
25
26
27 \PHC\29296\ 9999\COMPL T• eMP

44S9~J.Allen
28

7
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1
GILMORE F. DIEhMANN, Jr.
2
PATRICIA CULLISON
RICHARD P. WALKER
3
vI 505 Montgomery street
I
I
P .4
~
Telephone: (415) 986-4200
5
Fax: (415) 982-1394
6
7
8
UNITED STATES DISTRICT COURT
9
NORTHERN :DISTRICT OF CALIFORNIA
10
11 FEDERAL )
) NO. VRW'
12
)
) FI T AMENDED COMPLAINT
13 v. )J R:
) 1. Breach of Contract .
14
HAMILTON T & COMP ) J2. Breach of Fiduciary
CONNIE C. TRONG, Duty
1.5 REMINGTON S. INC., RICHARD ,}3. Breach of Agency
FOWLES, S N LAU, CHRISTINE) puties
GRAMBLING, BARRY MORGAN, AL MAY,) 4. Breach of Implied
ED HARGIS, VICKY DIMALANTA, ) Covenant
DRESDNER ENTERPRISES, INC., ) 5. Negligence
DRESDNER PETROLEUM, H.I. ) 6. Negligent Misrepre-
INTERNATIONAL, C.R. ) J sentation
ACQUISITIONS, INC., and ) ~ 7. Fraud
KNIGHTSBRIDGE, } 8. Conversion
) 9. Violation of Racketeer
20 Defendants. )~c' Influenced and Corrupt
________________________________) organizations Act
21 (18 U.S.C. §§1961
et~)
22 10. Unfair Business
Practices .
23 11. False and Misleading
Advertising
24 12. Constructive Trust
13. Accounting
25 14. Money Had and
Received
26
15. Declaratory Relief
16. Injunction
27
DEMAND FOR JURy TRIAL
28
1ST AMENDED COMPLAINT

1
Plaintiff Federal Express Corporation ("Federal Express II)
2
alleges as follows:
3
THE PARTIES
A
1. Plaintiff Federal Express is a corporation duly
5
organized and existing under the laws of the state of Delaware
6
with its principal place of business in Memphis, Tennessee.
7
8
that defendant Hamilton Taft &: Company (nHamilton Taft lf ) is a
9
California corporation with its principal place of business in
10
San Francisco, California. Hamilton Taft is engaged in
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interstate commerce.
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chairman and majority shareholder of Hamilton Taft, and is a
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20
5. Plaintiff. is informed and believes and thereon alleges
21 that defendant Richard Fowles (IiFowles") was president of
22
Hamilton Taft from March 1989 through September 1990, executive
23
vice president of Remington from October 1990 until January 1991,
24
and chief financial officer of Hamilton Taft thereafter.
25
Plaintiff is informed and believes and thereon alleges that
26
Fowles resides in California.
27
28 that defendant steven Lau ("Lau") was a 'vice president and

2
1
director of Hamilton Taft at times relevant herein, and resides
2
in the state of California.
3
A
that defendant Christine Grambling ("Grambling tl ) was president of
5
Hamilton Taft from September 1990 until January 1991, and is and
6
was a resident and citizen of "the state of Texas.
7
8. Plaintiff is informed and believes that defendant Barry
8
Morgan ("Morgan") was chief accountant for Remington and
9
performed accounting functions for Hamilton Taft. Plaintiff is
10
informed and believes and thereon alleges that Morgan is and was
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operations for Hamilton Taft, and is and was a citizen and
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that defendant vicky Oimalanta was at all relevant times an
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20 that defendants H.I. International and C.R. Acquisitions, Inc.
21 are entities owned or controlled by, and affiliated with,
22
Armstrong and his affiliated entities.
23 12. Plaintiff is informed and believes and thereon alleges
24 that defendant Ed Hargis' (ltHargis lf ) was at all relevant times
25 president of Dresdner Petroleum, and is and was a resident and
26
citizen of the state of Texas.
27
13. Plaintiff is inform~d and believes and thereon alleges
28 that defendants Dresdner Enterprises, Inc. and Dresdner Petroleum

3,
------------------------ - - - --
(collectively "Dresdner") are Texas entities with their principal
place of business in Dallas, Texas, and are owned or controlled
by, and affiliated with, Armstrong and his affiliated entities.
that defendant Knightsbridge ("Knightsbridge") is a Texas entity
with its principal place of business in Dallas, Texas, and is
owned or controlled by, and affiliated with, Armstrong and his
affiliated entities.
15. Plaintiff is inf~rmed and believes and thereon alleges
that at all times herein mentioned, each of the defendants was
the agent of each of the other defendants and in doing the things
hereinafter mentioned was acting within the scope of such agency
and with the permission, authority and consent of the other
defendants.
16. There exists, and at all times herein mentioned there
existed, a unity of control, interest and ownership among
defendants Armstrong, Hamilton Taft, Remington, Dresdner, R.I.
International, C.R. Acquisitions and Knightsbridge (collectively
the tlArmstrong Defendants"), such that any individuality and
separateness of the Armstrong Defendants has ceased and each of
these defendants is the alter ego of each other. Adherence to
the fiction of the separate existence of the Armstr~ng Defendants
would permit an abuse of the corporate privilege and would

sanction injustice. Each may be held responsible for the acts of
the others.
JURISDICTION AND VENUE
17. This court has subj~ct matter jurisdiction pursuant to
28 U.S.C. §§1331 and 1332, 18 U.S.C. §§1964(a) et ~, and the I
1ST AMENDED COMPLAINT I
4
~
doctrine of penQ~nt jurisdiction. The amount in controversy
2
exceeds the sum or value of Fifty Thousand Dollars ($50,000.00),
3
exclusive of interest and costs .
.4
~~. Ven~e is proper in this jUdicial district pursuant to
5
28 U.S.C. §§1391(b) and (c) and 18 U.S.C. § 1965, because
6
defendants do business and transact their affairs and the claims
7
herein arose in this jUdicial district.
8
GENERAL ALLEGATIONS
9
19. In January of 1990, Federal Express entered into a
10
written payroll tax service contract with Hamilton Taft.
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19 the money advanced to it by Federal Express between the date
20 advanced and the date the funds were due. Hamilton Taft promised
21 to timely pay Federal Express's taxes, as well as any penalties
22 which resulted from Hamilton Taft's acts or omissions.
23 20. On or about March B, 1991, Federal Express was informed
24 by former Hamilton Taft controller steve Solodoff that defendants
25 were engaged in a massive scam involving tax fraud and other
26
misconduct. Plaintiff was informed that, among other things,
27 defendants were not disbursing Federal Express's taxes to taxing
28
authorities when due.

5
2 that rather than pay Federal Express's payroll taxes when due
3 'with the money transferred for that purpose, defendants held such
A
money for an additional period of time. Plaintiff is informed
5 and believes and thereon alleges that defendants, at times, used
6 funds belonging to other Hamilton Taft clients to pay Federal
7 Express's taxes and any penalties for late payments; at other
8 ~times, defendants used funds belonging to Federal Express to pay
9 the taxes and penalties of' Hamilton Taft's other clients.
10 I
Plaintiff is further informed and believes that some of Federal
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Armstrong Defendants Only)
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20 paragraphs 1 through 22, inclusive.
21 24. Defendants' conduct constitutes a breach of the payroll
22 tax service contract.
23 25. Federal Express has performed all conditions and
24 covenants on its part to be performed under the payroll tax
25 service contract, except those conditions or covenants excused or
26 prevented by defendants' breach and the wrongful acts and
27 omissions described herein.
28

6
1
26. Defendants have further breached the contract by not
2
providing plaintiff full access to plaintiff's tax records in
3
defendants' possession, custody or control •
..c1
27. As a direct and proximate result of defendants' breach
5
of contract, plaintiff has suffered damages in an amount to be
6
proved at trial.
7
SECOND CAUSE OF ACTION
8
(Breach of Fiduciary Duty
9
Against the Armstrong Defendants Only)
10
28. Plaintiff realleges and incorporates by reference
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paragraphs 1 through 27, inclusive.
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29. Federal Express placed extreme trust and confidence in
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paid when in fact they were not, misapplying or misappropriating
20
Federal Express's funds; and failing to invest funds as a
21
reasonably prudent investor would invest his or her own money.
22 Defendants further breached their fiduciary obligations by
23
refusing to provide Federal ExPress immediate and full access to
2A
all documents and information in defendants' possession, custody
25
or control relating to Federal Express's payroll taxes and funds_
26
31. As a direct and proximate result of defendants' breach
27
of fiduciary duty, plaintiff has suffered damages in an amount to
28
be proved at trial.

7
1
THIRD CAUSE OF ACTION
2
(Breach of Agency Duties
3
Against the Armstrong Defendants Only)
~
5
6
33. Pursuant to the written payroll tax service contract,
7
defendants became plaintiff's agent.
B
34. Pursuant to its agency relationship, defendants owed a
9
duty of loyalty to Federal·Express. This duty of loyalty
10
required defendants to disburse Federal Express's payroll taxes
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C to taxing authorities, to do so in a timely manner, and to
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harmful to Federal Express's interests. Among other things,
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investments with Federal Express's funds, or investments which
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might expose Federal Express to tax penalties. Defendants also
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possession, custody or control relating to Federal Express's
20
payroll taxes and funds.
21 35. Defendants' conduct constitutes a breach of their
22 agency duties.
23
36. A~ a direct and proximate cause of defendants' breach
2.4 -.
of their agency duties, plaintiff has suffered damages in an
25
amount to be proved at trial.
26
27
28

8
FOURTH CAUSE OF ACTION
2
(Breach of the Covenant of
3 Good Faith and Fair Dealing Against
the Armstrong Defendants Only)
.4
5
paragraphs 1 through 36, inclusive.,
6
38. Implied in the tax service agreement is a covenant of
7
good faith and fair dealing whereby defendants were obligated not
8
to take any actions Which would deprive plaintiff of the benefits
9
of the contract and to do everythihq which the contract
10
presupposed defendants would do to accomplish the contract's
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0 purpose. Defendants breached this implied covenant by failing to
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otherwise misusing plaintiff's funds as herein alleged.
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been damaged in an amount to be proved at trial.
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l::: FIFTH CAUSE OF ACTION
CQ
19
(Negligence Against-All Defendants)
20
21
22
41. By agreeing to pay Federal Express's payroll taxes, and
23
to do so in a timely manner, defendants assumed a duty to Use
2,4
such skill, prudence and' dil~gence as other members of
25
defendants· profession and business commonly possess and
26
exercise.
27
42. By failing to make ~imely payments to the appropriate
28
tax authorities and by imprudently using plaintiff's funds,

9
1
defendants have breached that duty. Defendants knew, or should
2
have known, that Federal Express would be injured by defendants'
3
acts and omissions •
.4
43. As a direct and proximate result of defendants'
5
negligence, Federal Express has sUffered damages in an amount to
6
be proved at trial.
7
SIXTH CAUSE OF ACTION
8
(Negligent Misrepresentation Against All Defendants)
9
44. Plaintiff realleqes and incorporates by reference
10
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45. Defendants, at the time they entered into the tax
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service agreement and thereafter, represented to Federal Express
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that did not and would not harm or injure plaintiff's interests
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Express's payroll taxes in an appropriate manner were made with
20
the intent that Federal Express rely on the representatio~s. ·1
21
Federal Express was unaware that the representations were false
22
and, believing them to be true, was induced to enter into the tax
23
service contract and to advance and continue" advancing its
2.4
payroll taxes to defendants.
25 47 •. As a direct and proximate result of defendants·
26
negligent misrepresentations, Federal Express has suffered
27
damages in an amount to be proved at trial.
28

10
J 48. DefelJu.ants' conduct was willful, malicious and
2
oppressive, and done with the intent to injure plaintiff or with
3
reckless disregard of its consequences to plaintiff, and
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justifies an award of exemplary damages.
5
SEVENTH CAUSE OF ACTION
6
(Fraud Against All Defendants)
7
49. Plaintiff real leges and incorporates by reference
8
9
50. Defendants, at the time they entered into the tax
10
service contract and thereafter, represented that they would pay
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manner and in a manner that did not and would not expose
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20
representations and reasonably believed them to be true. In
21
justifiable reliance upon those representations, plaintiff was
22 induced to enter into the tax service contract and to advance
23 funds and continue advancing "funds to defendants.
2.4 53. As a direct and proximate result of defendants' fraud,
25 plaintiff has suffered damages in an amount to be proved at
26
trial.
27'
54. Defendants' conduct was fraudulent, willful and
28
oppressive, and plaintiff is entitled to exemplary damages.

11
1
EIGHTH CAUSE OF ACTION
2
(Conversion Against All Defendants).
3
55. Plaintiff realleges and ·incorporates by reference
.4
5
56. At all times herein mentioned, plaintiff had, and
6
continues to have, the right to possession and ownership of the
7 funds conveyed to defendants for payment of Federal Express's
8 payroll taxes.
9
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20 60. Defendants' c6nduct was willful, malicious and
21 oppressive and justifies an award of exemp~ary damages.
22 NINTH CAUSE OF ACTION.
23 (Violation of RICO, IS U.S.C. §1961 et seq.
Aga~nst All Defendants)
24
25 61. Plaintiff realleges and incorporates by reference

26
28 that defendants misappropriated and converted plaintiff's funds

12
1 to their own use, failed to pay amounts due to taxing
2 authorities, and misrepresented to plaintiff that its tax
3 payments were made. Such conduct was in violation of 18 U_S.C •
.4
§1341, in that defendants used Federal Express 1 s funds for their
5
own personal benefit and carried out their scheme by means of the
6 united states mails.
7
8
that, as a part of defendants' fraudulent scheme, defendants
9 mailed checks across interstate lines and communicated with
10 Federal Express that payments were made, when in fact such
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20 believes that this pattern caused injury to plaintiff and others.
21 65. As a proximate result of defendants' pattern of
22 racketeering activity, plaintiff is informed and believes that it
23 has incurred damages consisting of, among other things, exposure
2~
to penalties for failure" to pay taxes when due, and liability for
25 taxes that defendants failed to pay.
26 66. As a direct and proximate result of defendants'
27
conduct, plaintiff is entitled to recover treble damages from
28
defendants in an amount to be determined at trial.

13
1
TENTH CAUSE OF ACTION
-2
(Unfair Business Practices Against All Defendants)
3
.4
5
68. Defendants' acts, omissions and representations
6
constitute unfair business practic~s in violation of §17200 of
7
the California Business and Professions Code.
8 69. As a direct and proximate result of defendants' unfair
9
business practices, plaintiff has suffered damages in an amount
10 to be proved at trial.
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20 and misleading advertising , plaintiff has suffered damages in an
21 amount to be ascertained at trial.
22 TWELFTH CAUSE OF ACTION
23 (constructive Trust, Against the
2,4
25 73. Plaintiff real leges and incorporates by reference

26
27 74. By virtue of the wrongful acts described above,
28 defendants have been unjustly enriched and hold plaintiffs

14
1
funds, as well as any proceeds of those funds, as constructive
2 trustees for plaintiff.
J THIRTEENTH CAUSE OF ACTION
At
(Accounting, Against the Armstrong Defendants Only)
5
6
7 76. Plaintiff has demanded, and is entitled to, a full
8 accounting of all monies paid by defendants to tax authorities on
9
plaintiff's behalf, and immediate and full access to all records
10 in defendants' possession, custody, or control relating to
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20 plaintiff's unpaid tax liabilities and penalties, if any, in an
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21 I amount which is presently unknown but which will be ascertained

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at trial.
23 I
79. Neither the whole nor any part of this sum has been
II
2.4 II paid despite demand therefor. The amount of any such unpaid
25 taxes and penalties is now due and owing to plaintiff.
26
27
28

15
1
FIFTEENTH CAUSE OF ACTION
2
(Declaratory Relief Against the
3
A
5
6
81. Pursuant to the terins of the payroll tax service
7
agreement, defendants agreed to indemnify plaintiff for all
8
injuries caused by defendants' conduct. Plaintiff seeks a
9
jUdicial declaration that this express indemnity is enforceable
10
and that defendants must indemnify Federal Express for any unpaid
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tax liabilities, including penalties.
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defendants' possession, custody or. control concerning the use and
20
transfer of plaintiff's tax funds. Plaintiff is also entitled to
21·
injunctive relief restraining defendants from continuing their
22 wrongful course of conduct described above, and ordering
23 defendants to immediately provide plaintiff full access to all
24 documents and information in defendants' possession, custody or
25
control concerning Federal Express1s payroll taxes and funds.
26
WHEREFORE, plaintiff prays for relief as follows:
27
1. For an injunction r~straining defendants from
28
destroying, removing or altering all documents and information

16
1 concerning Federal Express's payroll taxes and funds in
2
defendants' possession l custody or control and affording Federal
3
Express immediate and full access to such documents and
.4
information:
5
2. For an injunction requiring defendants to return
6 i~ediately to Federal Express any and all sums held for or on
7 account of Federal Express;
8
3. For an injunction ordering defendants to cease using
9
plaintiff's payroll tax funds as part of defendants' scheme, or
10 for any wrongful purpose, pending trial;
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19 9. For such oth~r and further relief as this Court deems
20 appropriate.
21 Dated: March 20, 1991
22
BY:Rft:!.{~~
23
24
25 FEDERAL EXPRESS CORPORATION
26
27
28

17
1 JURy DEMAND
2 Plaintiff Federal Express hereby demands trial by jury.
3
Dated: March 20, 1991
.4
BRONSON, ERONSON & McKINNON
5
6 By: /?4.U
RICHARD
wtD!L
P. WALKER
7 Attorneys for Plaintiff
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\RPW\29882\9999\F1RSTAM.CHP
28 3161·A. ThaMS

18
D
"
MICHAEL H. AHRENS (state Bar No. 44766)

GILMORE F. DIEKMANN (state Bar No. 50400)
2 LILLIAN G. STENFELDT (state Bar No. 104929)
3 505 Montgomery Street
4 Telephone: (415) 986-4200
5 Attorneys for Petitioner
FEDERAL EXPRESS CORPORATION,
6 a Delaware corporation
7
B UNITED STATES BANKRUPTCY COURT

9 NORTHERN DISTRICT OF CALIFORNIA
10
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In re
HAMILTON TAFT iii COMPANY,
91 i 3SE NO.1 0" "
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~ a California corporation, ) Chapter 11
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Debtor. ) INVOLUNTARY PETITION
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19 Hospital; and (c),} The Board of Trustees of the Leland Stanford
20 Junior University (hereinafter collectively called the
21 "Petitioners"). Petitioners are creditors of Hamilton Taft &
22 Company, One Market Plaza, spear Street Tower, 32nd Floor, San
23 Francisco, California 94105 (hereinafter called the "Debtor").

24 Petitioners hold claims against the Debtor, not contingent as to
25 liability and not subject to bona fide dispute amounting to, in
26 the aggregate, in excess of the value of any lien held by them on

27 the Debtor's properties securing such claims, to at least
28
INVOLUNTARY PETITION
'.
$5,000.00.
-,,-
-( f
The nature and amount of Petitioners' claims are as

2 follows:
3 (a) Federal Express Corporation holds a claim
.d exceeding $32,000,000.00 for moneys advanced to Debtor, which
5 moneys should have been used for remission to the appropriate tax
6 authorities. but were not so used. On account of Debtor's
7 actions, in excess of $32,000,000.00 is owed by Debtor to Federal
B Express Corporation;
9 (b) Stanford university Hospital holds a claim
10 exceeding $1,700,000.00 for moneys advanced to Debtor, which
Z 11 I moneys should have been used for remission to the appropriate tax
0
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19 used. On account of Debtor's actions, in excess of_$~96.,OOO.OO_
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20 is owed by Debtor to The Board of Trustees of The Leland Stanford

21 Junior University.
22 2. The Debtorls principal place of business or
23 principal assets have been within this district for the 180 days
24 preceding the filing of this petition or for a longer portion of
25 the IBO days preceding the filing of this petition than in any
26 other district.
27 3. The Debtor is a person against whom an order for
28 relief may be entered under Title 11, United States Code.
2
,.
4. The Debtor is generally not paying its debts which

2 are not subject to bona fide dispute as they become due as
3 indicated by the following: Debts alleged in paragraph 1 of this
4 petition are due, and notwithstanding due demand that payment be
5 made, no payment has been promptly made by the Debtor.
6 WHEREFORE, Petitioners pray that an order of relief be
7 entered against Debtor under Chapter 11, Title 11, united states
8 Code.
9 & McKINNON
10
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~ :'" FEDERAL EXPRESS CORPORATION,
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13 a Delaware corporation
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1.4 505 Montgomery street
U ::i ~ San Francisco, CA 94111-2514
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~a~h{~ McCUTCHEN, DOYLE, BROWN &
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19 Attorneys for STANFORD
UNIVERSITY HOSPITAL
20 Address:
Three Embarcadero Center
21 San Francisco, CA 94111
22 McCUTCHEN, DOYLE, BROWN &
ENERSEN .
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23
2.4
By 1'I4Jd/
Attorneys for THE BOARD OF
25 TRUSTEES OF THE LELAND
STANFORD JUNIOR UNIVERSITY
26 Address:
Three Embarcadero center
27 \MHA\99999\0900\~ETITIOU.PET San Francisco, CA 94111
4218-W&lters
28
3
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VERIFICATION
2
I,
3
the attorneys for the petitioner named in the forgoing
petition, declare under penalty of perjury that the
5
foregoing is true and correct according to the best of
6
my knowledge, information and belief.
7
Executed on March 1-0 , 1991.
8
10
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~ the attorneys for the petitioner named in the forgoing
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L;.l - ~ foregoing is true and correct according to the best of
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20 I, R~ ~ d , one of
21 the attorneys for the petitioner named in the forgoing
22 petition, declare under penalty of perjury that the
23 foregoing is true and correct according to the best of
24 my knowledge, information and belief.
25 Executed on March c2cJ , 1991.
26
27
28
e.
11\ the past few daY3 .frmer AmI'
atrong employft, Steve S\:l\odoft. befan to
.- pn.vately llrov1dt a number of major eom·
.' panleS lIld Institutions llIith 1\ a1mple expl&.·
naUon tor !dr. AmlJtrong's suddfrUy ap--
p8.rtnt lUId setrnltltly lnexhaumb\e
wral!.h.
Tax Question BetOn! he rra1ined kut month. Mr. 8l)-
lodoU w.u controller of aJl obseurt san
Frant:laco f\rm. HaJrillton Taft , 0)••
Was the Big Spender owned by tAr. AMN:U'OIlI sinet Kareh
1889. Tilt! nrrn &r\l\ua!y pt'OCHS6 $3.$ btl·
Just Spending Money lion In payroll vtlthholdtrlr \UK O~ed to
t~ Inlmlal Rl'nnllf Service and oUll!t tax
npnclr!> for such chelle employen u
Firms Owed to IRS? f.'edna! ExprKl. SGny CDrp.. C8st1t" &I
(MIce. Sta.nford UnlY.frslt)', the Slate Bar
01 California and the OaXland Athlell~5,
Texan 'Chip' Armstrong Ran Ktnd of Potu1 Sc~e
Mr. SOlodotf eJletflS to federal au\I1OJi-
SchemeProcessing Funds. tItS lind In a memorandum tU!d Wllh" fed·
('ral SUit that I~&d cd ptomptly de\)OS1t·
Former Employee Alleges Inr all or Ul.esc funds WIlli the proper fOv,
-
FedEx Frets Over $16 Million
munel\t atency as stfpul8.t&d by c:ontract.
~tr, Armstrong diverted many nul1kmJ to
IllS own prlVDl! lISt5 111 a kJnd of PollXl
scheme now on me verge af CQlIapse.. Some
Ham1\lon Tan cusll:mers confirm the dJ
\ets1On!. and Mr. SoJodorf estimateS that
thpy total nearly llOO mUllon.
Hnml/lon TaIt. It tums out. Is OM Of tile
olf!iest tax PTOCWOI'l In tht countrY. But
thIS 1SIl't a ~at badness to be III right
now. LASt year, the ms cut the lag t1me
bt[lV~n payday and w: payment$ from
111m c1aYS to one with a strumltned de-
\lOll! (IrcKeu, sharply eurta.lling m.arttns.
all: players ll~e ADP and ftankAmtrtca
I
~enmle tar better fees by Oftering com-
{lltte payroll servtcea. I
AtCDNhng to Mr. BolOdoff, the lure for
Mr. ArmStrong VI'tlS DOt profJl.S but blliE. I
lOWly IIQrttUlaltfi cash flows. AcC2Sll to
thai money has ltelped him crea[e A Ute
~1yle lie could Qtlly dre:un of eluting 24-hoUr
I
f
lIreboost sh114. a ~ style tlIlt woUld al·
low tum to star In bl$ own rodeos anytime !
hp WIshes IUld rn~ tbe DallaS W01l\K he
WIe<I [Q caze I! in the sa<:lety pa2ef;. I
How It Worked
litre's hcnv tbe &eb!me worxEe,acwrcl'
1!Ii CD Mr. SOlodoffs memot6JIdum filed f
With flld'tal COllrt documents: ~ basLt
I<tu ~ 10 mask the nonoayment of taxes
In a swtInr CJllarter .1[' llllOt too tough, All I
¥OU do is report to thI ta.l &reney tb&t you
:lre maklnr Ule omlned pr.yrnenl \aU as r
the new quarter beeW. 10u take t!'&t new
QUWt', payment wi nIl last quarter's I
bole. The bole ketJliS movltll forwan! one
qU!rU!r, wlUlt paymentS rece[vtd tI\ eleh .
EUeeeutVf qlUU1er ketp JUlini' It. ne big
I
rtwatd for A1.I this klle·filllnr 1& the chunk
Of unpaid te.lCefi trazn the &ta.nI.!lg QIlArter
trl found money,
BUI evenrually, hO\~atUng rea very
COStly. Tha t'! wb:e re dlt Plwi aspect
~s In. The IRS 1sse6SeS " 10"1. penalty
p!Ils ilItet~ on C"Jelj' lA~ ~l. Un-
Ie$t. YOU are um1l\r at \ea.st 1~ q\larterly
4~ annually I on your "fount! JnQIley"
and pass II aJonr to tJ\e \i); num, you Will
!lave to dlr the ho~ that rnQeh deeper uch
~ around to repdr 1M c1AlrIafe,
As th~ blt6 il!t blrrer and mare c:l1ent5
I
• IN- blInn, the chanee Increases that same I
, ~Iltnl W1l1 ~l a penalty nClUte and ask '
~Jli questions. Inside Hamilton Tatt. t
...~ ue ItnOW1\ as'''sensltlvt'' clltll'S, ae·
, ~J._~ ......_ In PnlJ4' .4.6. ColwnJtJ
~ .
-i:
broker un make money 1UU\w.l1't A .. " .... :.1 ....
r ..
~.- r~ ..·: . :..---: ...-.;:..------
•. _
'ax Question: Wag- Big-Spender 'Chip' Armstrong

Just Spending Money That Others Owed to IRS?
Ccmluwtd From First Page paJI)"s books bltcauu Hamilton tah hu He term to Mr. SolodoH as a "dlIgnm·
t<Pt'dUlg to Mr. Solodoff and another ftlnner not pronded n~ dAta. Bven 10. It tled" em~.
emplayte. A H!mlltofl Ta.tt Ineom! state- reeentJ,y rillled Mr. Atmro'OnI $81.000 lor Exactly how Mr. Armstronr got control
.men t for 1990, lrIcludtd in court docu- tt! IU'Vlces. of flannltol1 Ta!t. 18 unclear. The Immer
ments, shows m rruWOll In penalties. w. '-I'he JI: is up," Sly! Mr. $Q)odOff 1D aD owner. talled MuPh!rma Ine•• in July
revtlll.leli of JII$t S7 Dl1Jllon on lh1! 1maJI· ~m!w. a4dinr that be has told every· 1988 pledged tlle rt.oek Of Hamllton Talt.
marg1n busUless. Ihlng he IaloWI ~ Ibt Intemal Revenue wbicb it Iwl Just bouftIt from Clrna Corp..
AcWtt on Mr. 8olodoff Ii tip, custGmt!'S Sel"Viee and tbt ,edml Bureau o! lnvest1· for SoU rnillloc, to • "private investor"
rtpresentinr half of a:s.mutoo Tall'I ~ pUon. He sa)1 he discovered the allered who gave MaxPharma an emergencytsaO.
P,bstts have suspended payments and lit- IChemt shtlrt!Y before Migning tram 000 loan. In !4a.Mh 1.9&9. Mr. Armstron: be-
manded proof tram tbe campa!lY that tt Hunllton TIJt, vnere he wu employed for eame the tOle oWfl!r "in exchanre of COD'
made complt~ and t1mtly deposits. Stone- seven JIlDllths. "It made I'M slck to see side ra.tkln (lDcludln r costs ) Of lpprtJX\'
wllied by offlclals of Harnllton Taft., Fed- Cbtp Wi! pain: away wtth thls." Mr. So-- mJJtIY SSSl,OOO," a.eet)roln: to Internal
eral Express, Lt$ ringle Iueest c:u5Um1er. locioff may aJsQ be nwUva.ted by a 1IOttD- I:lamUto1l taft doeurnenti
filed a breacll-of-(ODtnu:t suit WedDe$!&y ~ "ward 01 up to 25~ Of any tax~ teo Where that money came frOm is llso 8
in federal court In sa.n Frandsco. aDd )'t5. CtIvered onder pl'Ovislons Of the False myJtety. There ts eVi4enet tha.t hJs ta~r
tertlay won a lemporary restra1JIfnr onier Clauns Act. baa helped tln1nce him tn the pail. 'I'M ~
to pre'ient the company trom destroyiDg MeanW1ille. a rrowtnf number of execu· n1tlr Mr. AnnstrOn:'s Preml!rBank mAde
erucial record!. Mr. SoltlClotrs mernon.n· tives are leaving Mr. ArmItrong's V'IlrtOUS a loan to h1S son til 1966. The Federal De-
d\I.m was ftIe-d Wltli the Federal Express persons.llioldlnr companJes. Depanuresln posit lnsuranc.e Corp.• lUi reee!ver for the
luit. and 1n MOttler document, Federll Ex· !be last fe.... months 1rIcll.ldt Steven Lau. failed bank. bas EUed the son in Da1W led·
press attorney James Mulroy CIted "IJ(' Hamllton Tatt's vtoe PtU1dent of cash era! court. ift an attempt to ~er the
treme cl'locern fw up to $16 ml1l1on Fed· management; Christine Grambling, Ha1n- loaJ\ tlroceeds.
eral B~rtU's funds" representing a. re- Uton. Taft presidentj Barry MDrpn. a chief Clearly, Mr. Armstrong had rnmd
cent Intenm tax payment. ~taJlt for Rem1ngton CCiS., Mr. Arm- plans. A corporate brochure, pnnttd In
Other c\lStOltlers ta.dng potnoaI UabUl~ stronr's teal.esute coaeemi G. M1cIlael Rngl1sh and French, anbclp.axed ACSoubllng
ties in unpaid taXes of over 11 mll1Jon. &* H1Jt\S. presldent of Oresdner Bnterpmes. Of "rrass deposits" In ODe year to $10 bll
:0 rdll\g to a client llst Included in court fil· his 01.1 ecmpan,y. and George O'Brien. pres' Uoo-prtSUrnably Ul~ new Hmullon
ingS, tnclud.e: Sun MJcl"OS)lStem5. !andem ldent of KJIWltsbridge Cos.• a hOJ&ng com- Taft cUStOmers-and projected that tht
Computer, Neunan MarC\lS Oroop, Sony pa.ny tor many of Mr. Armttronr's eDte~ bu~nr empIre would "foctI.s on f\nan
Corp, Clans Corp. S &I S Cted1t Cos., Vol· JlfIui, incJud!nr JWn1lt.erL Tatt. cta.I services ~ch as cash anti portfolio
ume Stloe Corp., Comlnerctal crtdit CQrp•• "! really W8l\t to tell wr side of tM manaJement to benefll from enonnow
R..R. Donnelly" SMs. SUnlord Uruvemty, 1tOr'Y." says Mr. ArmsU'ong, in a brief In· growth opponunilies we believe are b!-
or
and lbt State Bar caltfomta.. terv1eW With this newspaper. Tall and com1lI: ava11ahle In the new Europe."
One customtr's attorney says, "It loots ta.D.ned. with b1s brht brown halr faWDi' Plans to open an office bl Geneva were
hk@ there have been cases where they over the eollar of his double-breasted IUit mentioned
dlc1nl make payments [hey wert eon· In a. uM1ami Vlee" look, he shoWS not the Perhaps most tetling. I.n the brochure's
lraeted Ie maJ(e, or ma~ them late and In· illrbtest m.ee of trlX1ety. eover letter. Mr. Annstronr writes: ".Al
curred penalties. Now we ert ayinr fir-
to H1S lather. Connie C. Armstrong. ~ we -b.ave fI'OW!I. 1 !lave never lost sigbt o!
ur~ out If we art In tI1e bole. 1 surpeet we
!bown censtderable 1ntt1atlve BDd eIleru the irnpona.nee of m.a1nta1n1ng boUi t1scJJ
s.n but I'm rot certain. We w1lI know In his own de.aJmgs, a.et01'd1nr to evidl~ and personal intefrlty. These ~p &l'I~
within a day or twO." eonl\!Cted to hls 1987 lnd!ctment OD honest values Iff at tile roots or my Texas
Whet.ber these customers w1D suffer It· eharies of IlundeJ'in: DeIU'Iy Sl mUllan, ~n~e." -
weI losses wtlI depend on Hanultoc Taft's Dlrtly throui'b Premier Bank. a Dallas c=
a.blh!Y to renerate eash quickly from ur- bank with assets of S28 mUlloo UlAt be was
taln tn~sunenlS Of! Its booXs. At, of Dec. cJul1nTWl of.. One piea ot .vidence was A Litton Unit's Soviet Venture
31. It MId notes totallng I6B D1W101I !rOm t!P!d eonversatiotl b!twetn tlIt senior Mr. BEVERLY' HIUS. callf.-A su~a.ry
comp:U\les owned by or afftlla.tea with Mr. ArtI'lStrQng aM a federal a:ent poslnf as a of Unoo lMutrles Inc. stined an ~
Armstrong. a.ceorchng to an WWldt~ Co1ombllln money runner. A.eeord\Dg to ment v.1th a SoViet concern to form a lolnl
e£lmP8J\Y balanee sheet. tanner iUiS1Stant u,s. &nomey WUbam venture to provide teehnlealtervlces In tilt
"There is IUlcertaU'lty of me company's Sheetz, Mr. ArmStrOOr aaJd OIl the tape Rug1an republic;.
ahll1ty to meet Its obhgaUans," says AIl- that "I can move money in W waJnes. I T'e"", Of UI! ~nt weren't dis
thony DolaIlStl of KPMG Put MaMck. can v.'a.sh m~.1 want yOUr money and I closed.
Ha.nullOfl Taft's aCCOWlWlL In a JUDe 1989 Will move It." The trt&l had barely begun The unlt, W~rn AtWi InternationAl.
J'tview. PUI Marwick cited a $}g million before be pleaded &U1Jty to ~ of the of Hourtcm. llgDed the a.rreement witb
worlllng~8.pltal debell and B&ld "substan- charJes and went tD 'ail. TyumenneftereoftlikA. I provider of oU
tially mote f\lnds hAve been collected fn)rn The junior Mr. AI'D1ItJ'Ol1I. the eldest field servtees for' the ld1ntStrY of aul1ld
clients tha1l art currently avallahle to lIllY of nve sons. 1Sn't t.e.1Jtlnf any more, on ad· Gas bl the Tyumen provtaoe, which llrD"
those clients' tues." By year-end 1990. an vice of his anorney. 1Jl a letter Mr. Arm· ducu about CO'YQ af the So\1let Union'5 OI!
Internal balanee sheet 'boWl. that figure £cronK' sent ro customers Tuesday,lle Bald, and gas. Unon is 6 dlverslhed ttehnology
had swelled to S87 mllllon. "We will stAnd up to the lueh.est levels of eompa.ny that proVIdes electronic and ~
Ptal Marw1ek says It ha.s fAUtd tor two scrut1Jl,y to d1$p1'OI1e these f8.1se and mail' ItrISe systems. resource explorulon 6e r\"
years to complete a full audit Of U1e com- elou.s 81legaUons" made by Mr. Solocloff.
-'
k:es and lndum1al automatlOll systems.
.
Memorandum
To SAC, SAN FRANCISCO (196A-SF-93255) (tN¥e 3/17/91
Prom UhL-----' b7C
Subject (CHANGED)
CONNIE C. ARMSTRONG JR. AKA,
CHIP ARMSTRONG, DBA
HAMILTON TAFT AND COMPANY
ONE MARKET PLAZA, SUITE 3200
SPEAR STREET TOWER
SAN FRANCISCO, CA. 94105
MAIL FRAUD, FBW (A), TAX FRAUD
00: SAN FRANCISCO
Title marked changed to note the true name of captioned

subject Armstrong.
The purpose of this memorandum is to request authority
to create a series of sub files for this case. This memorandum is
to be maintained on the inside cover of each of the following sub
files as well as the top serial of the main file.
Sub c: All FD-302's
Sub D: Subpoenas and all correspondence regarding same.
Sub E: All correspondence and or documents received
from victim corporations. A new subfile should
be created when documents are received from each
separate company. These may be designated E-I,
E-2, etc.
Sub F: All information on captioned subject Armstrong.
Sub G: All Record checks, DMV, Criminal checks, photos,
etc.
Sub H: All correspondence with the United states
-- ~Attorney's office.
Sub I: All information received or sent to the IRS.
: All Prentice Hall, Information America and or
Dataquick inquiries.
Sub K: All computerized analysis of documents and or
account information.
SUB L: All media coverage of thO
SgB M: All inform ng forefeiture proceedings.
(~.e(' jlj~,,1V F, Ie SU:'J t::\.J 1/()1..J ~r, l,~) ~
1-19 6A-S F- 93255 SUB-C
Jd\/1:
II
Jl1L EARCHED
[."I"~UC
ItIOEXEO
-.-.t.iIol-----II-'---'-____
196A-SF-93255
SUB N: All correspondence and/or documents received

about corporations which material amounts of
money and/or property was transferred into from
Hamilton Taft; And/or any other corporations
that one of Hamilton Taft's officers has
monetary interest. A new subfile should be
created when documents are received from each
separate company. These may be designated N-l,
N-2, etc ..
SUB 0: Any ~nformation, correspondence received from

the trustee appointed to handle the Hamilton Taft
bankruptcy
2
-- - - ------. .........~---. -
manticlp.:ition 01 a. pl)ssible sippi strikl"'.
Thomas J. l.!sher, prpsident of USX·s
Bankruptcy Judge
Appoints Trustee
:: For Hamilton Tah t,,",,
.....
..... '
~.... By RALPH T. KING JR. .
, Sf.a.f!Reporter oj TKE: W ALL STREET JOURNAl.
SAN FRANCISCO - A federal bank-
ruptcy court judge appointed a trustee to
supervise RamUlon Taft & Co., a processor
of payroll taxes accused of diverting as
much as $100 million of customer funds in
an allegedly fraudulent scheme.
The decision by JUdge Lloyd King is un-
usual since Hamilton Taft has not sought
bankruptcy protection. and the judge
. "".
.... ....-
.. ~ ..
hasn't ruled on a motion filed by cus-

tomers fot an involuntary Chapter 11 reor-
ganl1.ation. The judge said the "extreme
remedy" was needed because of "incom-
petence and mismanagement" at Hamilton
Taft and because "the potential for mis-
chief is great."
A former Hamilton Taft officer in mid- ;(
March told some of the company's largest ,,", ~ "'. .
customers of the diversion. Since then, a .- -,"" .~ ' -".
raft of lawsuits have been filed in San
, 'Francisco federal court against Hamilton
:t
-
.
.
\.
Taft, its owner, Connie C. "Chip" Arm-
~.strong Jr" and various affiliate companies
owned or controlled by Mr. Armstrong.
The suits allege Racketeer Influenced ..... w, ....... _--:-~ ...... '• • • _.•.• ,
.and Corrupt Organizations Act Violations,

breach of contract, fraud. and other
J-----------e
SEALED BID SALE

]6 PRI.\\E HOl'STO" L-\:--':D TRACTS
80~0 SELLER F,:-':..\~u:--:C A\:-\lLABlE
StrllteJ:icaffy lMart'd drr'c1(1I'I/ICllt alld illl'£'stmcllt

parce!.' Ihroll.~IJollt Ihe H111/S/flll mnrop(llirall area.
S I/,I:.i"!cstcd II.'C.( inc/llde mixed-II ~f' ((Iwmcrcial, residcll/ial,
h(lfel, retail, 111l/11Ija/IJil)' alld reslal/ront.
---- - - .... _.... -
Select properties include: .I¥l
17.3 Acres - AdJ.llL'111 Freeway ,. ~
Ll:/ .·\.;.t:i".~ PritT !6,405, 4lfS RnCTl'C' Pri(/': 12.562,1/9
f:6 Ant'- - Nt',n lnln'IlIllIllt'll!Jl Airrorr

~" : /'" t -'.'._'.J-J"", Hr.',T/'I· PmI'. 182-1,155
]'7'/ !\(f'·' - II, '.. 1, I "'I'!.,,·'·
- ': ~-, J,.',.".,,'" /'"" St',iI-".I,:!/J
••
FELDMAN, WALDMAN & KLINE
A Professional Corporation
2 PATRICIA S. MAR
L.J. CHRIS MARTINIAK
3 AUV~ J. ZACHARIN
2700 Russ Building
J 2JS Montgomery Street
San Francisco, CA 94104
5 Telephone: (415) 981-1300
o Attorneys for Trustee

Frederick s. Wyle
7
a UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
10
11 In re ) BANKRUPTCY NO. 91-31077 LK

)
r1
HAMILTON TAFT & COMPANY, ) Chapter 11
)
13 Debtor. )
------------------)
)
IJ
FREDERICK S. WYLE, Trustee in
91 ) ) Adversary Proceeding
~ORANDU
IS Bankruptcy of Hamilton Taft
16
Company,
Plaintiff,
)
)
)
F
AND AUTHORITIES IN
K
17
) SUPPORT OF APPLICATION FOR
v. ) TEMPORARY RESTRAINING ORD~R
)
18
CONNIE C. ARMSTRONG, JR. 1 et al. )
)
19
Defendants. )
20 ----------------)
21
22
23
25
26
MEMO OF P & A IN SUPPORT

OF TEMP RESTRAINING ORDER
/1bfl- Sf -73//~-p~t
TABLE OF CONTENTS
J S [CTTON -;.:._~:::::
J TABLE OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . .. . i ~
5 INTRODUCTION 1
6 FACTS IN SUPPORT OF INJUNCTIVE RELIEF J
..,, Transfers to Affiliates 4
B Financial Condition of Debtor 7
9 Consideration for Transfers and Risk of Dissipation 8
10 I. A TEMPORARY RESTRAINING ORDER IS APPROPRIATE

UNDER THE CIRCCMSTANCES OF THIS CASE 9
11
II. THE TRUSTEE AND CREDITORS STAND TO SUFFER
r2
IRREPARABLE INJURY IF THE TRO DOES NOT ISSUE 11
13
III. AS THE AFFILIATES OBTAINED THE ASSETS THROUGH
FRAUDULENT CONVEYNiCES, A CONSTRUCTIVE TRUST
1.1
SHOULD BE ESTABLISHED 1]
IV. THE INJUNCTIVE RELIEF APPLIES TO PARTIES

15
OUTSIDE THE TERRITORIAL JURISDICTION OF THIS
COURT , 15
16
CONCLUS ION 16
17
18
19
20
2\
23
24
25
26
-i-
TABLE OF AUTHORITIES
2 P~C~ -
3 C.~SES
~ Benda v. Craud Lodge of lAM,

584 F.2d J08 (9th Cir. 1978) 10
5
Big Shanty Land Corporation v.
6 Comer Properties, Inc.,
61 B. R. 272 (N. D. Ga. 1985) 1]
"'
I
calistoga civic Club v. Calistoga,

B 14] Cal. App. 3d III (193]) 14, 15
9 In Re Cumberland Investment Corporation,

118 B.R. ] (Bkrtcy. D.R. I. 1990) 12
10
Haskel Engineering and Supply Co. v. Hartford
i I Accident & Indemnity Co.,
78 Cal. App. 3d 371 (1978) 14
12
Heckmann v. Ahrnanson,
1J
168 Cal. App. 3d 119 (1985) 15
IML Seatransit Ltd. v. United states,

]23 F. Supp. 562 (N. D. Cal. 1971) 9
15
Inglis and Son Baking Co. v. ITT Continental
16
Ban!dng Co.
526 F. 2d 86 (9th Cir. 1975) 10
17
Los Angeles Memorial Coliseum Com'n. v.
National Football League,
18
6]4 F.2d 1197 (9th Cir. 1980) 10
19
Sturm/O'Connell v. Continental Bank,
19 B.R. 965 (1982) 12
20
Waffenschrnidt v. Mackay,
21
763 F.2d 711 (5th cir. 1..985) 16
22
23
2<1
25
-ii-
ST.l>,.TUTES
2 Bankruptcy Rules
] Rule 7065 ,::.
California Civil Codes
5 § 2224 •••••.••••••••••••••••••••••.••••.•...••.••••...••. :;.4
6 § 2223 • • • . • . • . . . • • . • • • • . • . • . . . . . . . . . . . • • . . . . . • . • • . • . . . . . . 1:.\
7 Federal Practice and Procedure
§ 2951 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • . . . . . . . . . 9
B
9
§ 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • • . . . . . . . . 9
§ 65(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • . . • . . . · .. 9
10
11
11
I]
14
\5
16
17
18
19
20
21
22
23
24
25
26
-iii-
INTRODUCTION
2 An involuntary bankruptcy proceeding was filed aga:~5:
J Hamilton Taft & Co., Inc. (the "Debtor") on March 20, 1991. Cn
J March 26, 1991, the Court appointed Frederick S. Wyle as trustee.
5 Although the Trustee has been in office only one week, his ar.d h~5
6 accountant's early investigation has substantiated that there have
7 been massive conveyances of assets from Debtor directly or
a indirectly to companies affiliated with Debtor. By this
9 application, the Trustee seeks a temporary restraining order
10 preventing the affiliated entities, the defendants herein, from
II encumbering, transferring, or disposing of any assets or any
12
proceeds of those assets, pending determination of the Trustee's
1)
adversary proceeding seeking recovery of the assets as fraudulent
),:1
conveyances.
15
The basis for issuance of a temporary restraining order
and preliminary injunctive relief is clear. During the two-year

16
17
period that Connie Chip Armstrong Jr. ("Armstrong") has owned and
controlled Debtor, extremely large sums of money collected from

18
, Debtor's clients for purposes of paying the clients' payroll taxes
19
have instead been diverted to other companies owned and controlled

20
by Armstrong ("Armstrong Companies"). Debtor's records examined
21
thus far show that at least $61,000,000 has been transferred
during that period. Debtor's records show that there are over
23
$84,000,000 in unpaid and overdue tax obligations that Debtor was
obligated to pay on behalf of its clients.! The Trustee has only

25
26 !

OF TEMP RESTRAINING ORDER -1-
been able to locate about $5,000,000 in known liquid assets ~f
2 Dentor.
] In return for the above described transfers, Debtor
4 received either nothing at all, or else unsecured "notes" or
5 "bonds" from the recipient companies. Trustee can find no written
6 instruments evidencing these Unotes" and "bonds" much less any~( c,

i }J'
7 collateral. The Armstrong companies that received these
8 transfers, cannot meet their own operating expenses without cash
9 "loans" from Debtor, are engaged in risky and speculative
:0 businesses, and have not even paid the interest due on the "notes"
11 and "bonds".
11 Nevertheless, Armstrong and his affiliate companies have
1] been spending money extravagantly, purchasing a multimillion
dollar "hobby" ranch for Armstrong's residence, installing a
15
multimillion dollar showhorse practice arena at the ranch, leasing
16
a palatial suite at the Mark Hopkins in San Francisco for a
17
reported $130,000, and maintaining a limousine and full time
18
chauffeur in San Francisco for a few day'S use per month.
19
The legal requirements for issuing injunctive relief are
well satisfied on these facts. The likelihood of success by the

20
Trustee on the merits of the claims set forth in the complaint is
21
compellingly high. Virtually every ground for finding a fraudu-
22
lent conveyance exists here. The Debtor has not been able to meet
2]
its payment obligations when due for virtually the entire period
24
Armstrong has controiled Debtor. Conveyances have been made
25
26

without receiving reasonably equivalent value. And each t~ans:=c
2 left Debtor more insolvent and undercapitalized.
] The risk that the assets will be dissipated is also
J compellingly high. At least $80,000,000 has been transferred to
5 entities under the control of the very person who engineered the
6 transfers, who has spent money lavishly, and who has refused to
7 provide any information to the Trustee about the transfers and
8 disposition of the Debtor's assets by the Armstrong Companies.
9 Armstrong knew that the transfers would render the
10 Debtor insolvent and wou_d prevent Debtor from meeting its
il contractual obligations. Such knowledge is imputed to the
12 recipients, who were owned and controlled by Armstrong. He and
1] they also should have known that the consideration, if" any, given
14 in exchange for the transfers were not reasonably equivalent in
15
value.
16
Certainly the balance of potential harm tips strongly in
17 favor of granting the requested relief and protecting the estate
18
from further dissipation of the transferred assets. The requested
,9 injunctive relief should be issued forthwith.
20 FACTS IN SUPPORT OF INJUNCTIVE RELIEF
21
The facts on which this application is based are set
forth in the declarations of the Trustee, Frederick S. Wyle

22
("Wyle"), the Trustee's accountant, Lee Ba1y ("aaly") and
23
investigator Fred Daulton ("Daulton") filed with this application
24
for injunctive relief, as well as the declarations of Debtor's
25
former treasurer James Paille ("Paille") and Debtor's former
26

OF TEMP RESTRAINING ORDER -)-
controller Steven SolodoEf ("Solodoff") filed in connection ~it~
the motion of Federal Express Corporation for appointment of a
3 trustee. References are to the specified paragraphs of their
J respective declarations.
5 Transfers to Affiliates
1. Since March 1989, Armstrong has been the sale owner
7 and in control of Debtor. Armstrong also owns and controls a
8 number of related companies inclUding the following: The
9 Remington Companies, Inc.: Winthrop Realty Company: CCA Holdings,
10 Inc.: CCAJ Corporation: Chase Development Corp.: Chayson Mortgage
11 and Investment Company; Cal-Pacific Management Corp.; C.R.
12 Acqu isi t ions; Dei, Inc.: Dresdner -F inancial Management
13 Corporation; Dresdner Enterprises, Inc.; Dresdner Petroleum, Inc.;
1.1 H.T. International, Inc.; Suisse Texas, Inc.; Knightsbridge
15 Companies, Inc.: and Knightsbridge Guaranty Company. (Wyle, ~ J;
Daul ton, ~ 10.)

16
17 2. Debtor's books and records show that during
18
Armstrong/s control of Debtor, there have been numerous transfers
19
from Debtor to Armstrong Companies (directly or through investment
20
accounts at Merrill Lynch and/or accounts at Bank One in Dallas)
2\
primarily to Armstrong's umbrella companies, Knights Bridge Inc.
22 and Remington. At least $61,000,000 has been so transferred
during Armstronq/s control oE Debtor, as reflected in the increase

23
of intercompany receivables from approximately $18.9 million
24
shortly after Armstrong acquired Debtor to $68.9 million as of the
25
end of 1990, plUS transfers tota11lng $11,000,000 in January and
26

february of 1991. There are currently over $80,000,000 in
2 receivables from the Armstrong companies shown on Debtor's bock3
3 and records. (Wyle, ~ 7; Baly, ~~ 4-6 and 12; Solodoff, Cj 17.)
J ] . On September 12, 1990 Debtor's books and records
5 reflect a transfer of $],]00,000 to Remington with the annotation
6 that this was "at Chip Armstrong's request". (Sa 1 y, ~ 9.)
"7 4. According to the former cash manager of Armstrong's
8 various companies, Patti Montague, upon obtaining control of
9 Debtor, Armstrong immediately wired about $2,000,000 to the
10 holding company for some of the Armstrong Companies. (Daulton,
!1 4J 9.)
12
5. According to Debtor's former treasurer, James R.
1] Paille, in JUly, 1939, Armstrong transferred approximately $J
14
million of funds belonging to the Debtor to Dresdner Enterprises,
Inc., a company which formerly owned the Debtor and is currently

15
16
owned by Armstrong. (Paille, ~ 8).
17
6. According to Paille, in July 1989, Armstrong
ordered $9,000,000 transferred from Debtor to Morgan Guaranty 8ank

18
to the account of Dresdner Enterprises, Inc. (Paille, ~ 9).
19
7. According to Paille, in August, 1989, Armstrong
20
transferred $7 million of the Debtor's money to an account of
21
Dresdner Enterprises, Inc. in order to purchase a shopping center
22
that Armstrong or one of the Armstrong Companies was buying.
2]
(Paille, 1 11).
24
8. According to Montague, in February 1990, Armstrong
25
transferred approximately $10 million of the Debtor's funds to
26

Winthrop for purchase of a showpiece ranch of over 2,000 aC~ES ~--
2 Armstrong's personal residence. A loan in the amount of
) approximately $6.4 million was booked to Armstrong, who gave a
J deed ot trust on the property to Winthrop. According to Montag~e,
5 winthrop in turn assigned the deed of trust to the Debtor.
o Portions of the $10 million from the Debtor were also used for
7 improvements on Armstrong's ranch, including about $2.4 million
8 spent on a cutting horse arena, and for prepaid interest on
9 Armstrong's note. (Daulton, ~ 16).
\0 9. According to Montague, Armstrong transferred some
11 $3 million of the Debtor's funds into Dresdner Petroleum to
12 purchase oil and gas leases in the name of Dresdner Petroleum.
13 (Daulton, ~ 15).
Id
10. According to Montague, after Armstrong acquired the
15
Debtor, the Debtor became the primary source of funding for all of
16
Armstrong's Dallas operations. The Armstrong Companies required
17
some $400,000 a month in operating costs--almost $5 million a
year--apart from any operating costs incurred by the Debtor

18
\9
itself. The funds for such operating costs were obtained from the
Debtor. (Daulton, ~ 10).

20
11. According to Montague, she prepared a weekly cash
21
summary projecting the Armstrong companies, cash needs for the
22
next several months. If the cash flow showed that the entities
would soon run out of funds, Armstrong would transfer the Debtor's
24
funds to the Dallas office. These funds were then distributed to
25
whichever Affiliated Company needed them. (DaUlton, ., 11).
26 '

Financial Condition of Debtor
2 12. Throughout the time Armstrong controlled Debter ::
] has been rendered unable to pay client tax obligations when due ~s
~ a result of transfers to Armstrong companies. As of the end of
5 1990 there were over $84,000,000 in overdue tax obligations which
b Debtor was supposed to pay on behalf of its clients, and fer whic~
7 Debtor received funds from its clients to effectuate ?ayment, but
B which have remained unpaid. Substantial penalties and interest
9 have accrued on these unpaid tax obligations. (Baly, 4J 15: Wyle,
10 ~ 4i Solodoff, ~ 20).
\\ 13. Debtor now has only about $5,000,000 in liquid
12 assets that Trustee has been able to find and recover. This
13
account may include money on deposit with Debtor for tax payments.
101
(Wy 1 e , 4f 2).
15
14. Debtor's internally prepared budget for 1991 shows
projected gross revenues to be about $9,000,000 to meet projected

16
17
operating and payroll expenses of $8,705,375 for 1991 from the
18
following sources:
:9
(a) About $4,130,000 in net fees and overnight deposit
earnings on legitimate business operations, and

20
(b) About $5,130,000 in interest expected to be paid by
21
affiliated entities on $57,000,000 in intercompany bond
22
receivables.
2J
The budget does not show any interest income projected on the
24
$11,800,000 intercompany note receivable shown on Debtor's books
25
and records. (Ba ly, ~ 16.)
26

Consideration for Transfers and Risk of Dissipation
15. On Debtor's records, the intercompany receivac:es
J are recorded as either "short term receivables", "long ter::! not.E:5"
4 or ul ong term bonds". However, the Trustee has nat found any:
5 (a) notes, bonds, or other instruments evidencing the intercoDpany
6 obligations, (b) collateral or security agreements securing such
7 obligations, (c) evidence of repayment of any portion of long ter~
8 obl igat ions, (d) evidence of payment a E interest on such
obligations. (Wyle, ~ 9).
10 16. The primary business of the Armstrong Companies
II appears to be somewhat risky and speculative in that i t involves
12
the acquisition of failing companies with the hope of turning them
I]
around. (Wyle, ~ 10).
IJ
17. Armstrong Companies which have received funds of
15
Debtor have been unable to generate sufficient revenue to pay
16
their own operating expenses and Debtsr's funds have been used co
17
meet such expenses. (Daulton, ~ 10).
18. According to Montague, after February 1990, the
19
wire transfers from Debtor to Armstrong Companies increased, and
Armstrong's personal living style became more extravagant.

20
Armstrong or his companies purchased:
21
(a) a large suite of luxury rooms at the Mark
22
Hopkins Hotel in San Francisco, at a cost of over $130,000;
23
(b) a red Jaguar for $105,000 at the 1990 "Cattle
24
Baron's Ball;1I
25
26

(cl a Rolls Royce for $135,000 at another char~~i
2 event.
(d) a 8~~ for $36,000 (paid for by Debtor) f~L a
J Hamilton Tart vice president, Christine Grambling.
5 None of Armstrong's companies, other ~han Debtor, had sUfficient
o revenues or funds available to fund these expenses. (Daulton,
7' Cl 17.)
3 19. Armstrong has, through his attorneys, refused to
9 tell the trustee whether and where the notes and bonds can be
:0 found, what assets are owned by the Armstrong Companies to support
I I the notes and bonds, why interest is not being paid, or any other
r2
information regarding transfers of the Debtors assets and disposi-
I J tion of the transferred funds. (Wyle, ~ 8).
loJ
DISCUSSION
15
1. A TEMPORARY RESTRAINING ORDER IS APPROPRIATE
UNDER THE CIRCUMSTANCES OF THIS CASE
17
Bankruptcy Rule 7065 provides that Federal Rule of civil
Procedure Rule 65 applies in adversary proceedings. FRCP 65(bl

18
sets Earth the circumstances under which a temporary restraining
19
arder may be granted. The tests for issuance of such an order are
20
a~in to those required to prevail on a motion for preliminary
2I
injunction. 11 Wright & Mi~ler, Federal Practice and Procedure
22
§ 2951 (1973 anJ 1986 Supp.): see, IML Seatransit Ltd. v. United
23
states, J2J F. Supp. 562, 564 (N.D. Cal. 1971). As held by the
24
Ninth Circuit:
25
26

In this circuit the moving party may meet
:ts burden by demonstrating either 1) a
2 combination of probable success on the merits
and the possibility of irreparable injury or
J 2) that serious questions are raised and the
balance of hardships tips sharply in its
favor. Inalis rand Son Bakinq Co. v. ITT
Continental Banking Co.] 526 F.2d [86] at 88
5 [9th Cir. 1975). These are not separate
tests, but the outer reaches "of a single
6 continuum" Benda rv. Craud Lodge of IA~,
584 F.2d J08 (9th Cir. 1978) J at ]15. Los
,
~ Anoeles Memorial Coliseum Com/no v. National
Football league, 6]4 F.2d 1197, l02~ (9th Cir.
1980) .
8
9
The foregoing facts support the following conclusions
10
which warrant issuance of injunctive relief:
II
1. Debtor is, and for months has been, insolvent in
that Debtor cannot, and for months has been unable to, pay when
12
1)
due the tax obligations for which it collected money from clients
and Debtor's liabilities exceed its assets.

14
2. Many or most of the transfers constitute converSlon
!5
or misappropriation of the assets of the Debtor by Armstrong, or

16
commingling of Debtor/s funds with those of Armstrong Companies,
17
and therefore assets of the Debtor are being wrongfully held by
18
such transferees.
\9
3. Even if some of the transfers were in exchange for
20
an oral (or even an as yet unfound written) promise to repay, the
21
transfers are not for reasonably equivalent value, since the fair
22
market value of such long term, undocumented, and unsecured
'23
obligations from privately held, financially shaky companies under
24
the control of a spendthriEt (Armstrong), would be a small
25
fraction of their principal value of 568.8 million, and clearly
26

not reasonably equivalent in value to the transfers. Thus, t:-.e
1 transfers to Armstrong Campanies were fraudulent conveyances.
) 4. All transfers were made to such Armstrong Compan~e3
j with their knowledge, imputed through Armstrong, that
5 (a) the money transferred was provided to Debtor
6 by Debtor's clients for tax payments,
7 (b) such transfers would interfere with and
8 prevent Debtor from performing its contractual obligations,
9 (c) such transfers would prevent Debtor from
10 paying its obligations as they came due, and
\I (d) Debtor was insolvent at the time the transfers
were made.
12
13
5. There is a substantial risk of dissipation of the
1d
assets of the Debtor that have been fraudulently conveyed to the
Armstrong companies controlled by Armstrong.

15
6. Armstrong breached his fiduciary duties to Debtor
16
by causing the transfers in that he failed to prudently invest and

17
protect the funds under his custody and control, he put himself 1n
18
a conflict of interest, he engaged in self dealing, and he

19
misappropriated the funds.

20
II. THE TRUSTEE AND CREDITORS STAND TO SUFFER IRREPARABLE
21
INJURY IF THE TRO DOES NOT ISSUE
22
Debtor's own records establish that tens of millions of
23
dollars of the Debtor were fraudulently conveyed to Armstrong
24
Companies owned and controlled by Armstrong, the controlling
25
26

OF TEMP RESTRAINING ORDER -ll-
shareholder of the Debtor and the person primarily responsi=le
2 its current status.
j By issuing a temporary restraining order, this court
J will preserve the status quo, allow the Trustee to conduct his
5 examination, and allow the court time to resolve the Debtor's
6 rights to assets in the possession of the Armstrong Companies
without fear that the Armstrong companies will dissipate t~e
s wrongfully held assets, either intentionally or by gross
9 mismanagement. Should the TRO not issue there is no way of
10
preserving those assets which have been transferred from the
11 Debtor to the Armstr~ng Companies. Arms~rong, who either owns or
12
controls those companies, will be free to transfer the assets or
13
further dissipate the assets either by continuing his fraudulent
practices or by simple gross mismanagement.
15
The present case is similar to the factual situation of
i6
Sturm/o'Connell v. Continental Bank, 19 B.R. 965 (1982). In
17
Sturm, the trustee of an estate asked the Bankruptcy Court to
enter a preliminary injunction to prohibit the transfers of funds

18
from a banking account held by a third party corporation alleging
19
that although the account was in the name of another entity, the
20
money in the account was, in fact, that of the debtor. The Court
21
issued a preliminary injunction preventing any transfers pending
22
the completion of the trustee's investigation and disposition of
2]
the trustee's complaint in view of the serious allegations Laised
by the trustee concerning the conduct of the debtor. See, also;

15
In Re Cumberland Investment Corooration, 118 B.R. ) (Bkrtcy.
20
MEMO OF ~ & A IN SUPPORT

--------_.- --
D.R.I. 1990) (the debtor was restrained from selling coins, e:<c::;:::
2 ~ith prior court approval, pending the results of the examine~'s
J investigation); Big Shanty Land corporation v. Comer Praoerties,
J Inc., 61 B.R. 272 (N.D. Ga. 1985) (the Court enjoined a Chapter 11
5 debtor and transferee from transferring debtor's sole asset, a
6 tract of valuable undeveloped land).
7 The intercompany diversion of funds and gross
8 mismanagement of same has been specifically set forth in the
9 accompanying declarations and shall not be repeated here. Suffice
10 it to say that the overwhelming evidence compels the conclusion
II that the assets nominally held by the Armstrong Companies,
12
companies either owned or operated by Armstrong are, in legal
IJ
effect, assets of the Debtor that are subject to the protection
, <1
and jurisdiction of this Court. The preliminary injunction
pending investigation and determination of the Trustee's complaint

15
would serve only to protect the creditors of the estate.
16
III. AS THE AFFILIATES OBTAINED THE ASSETS THROUGH FRAUDULENT

17
CONVEYANCES, A CONSTRUCTIVE TRUST SHOULD BE ESTABLISHED.
18
Because the acqUisition of the assets held by the
19
Armstrong Companies was through fraudulent conveyances, i.e.,
20
obtained through wrongful means, a constructive trust should be
21
established to hold those funds for the benefit of the Debtor. A
22
constructive trust is a re~edy used by a court of equity to compel
2J
a person who has property to ~hich he is not justly entitled to
24
25
26

transfer it to the person entitled thereto. 1 The trust is
; passive, the only duty being to convey che property. Haskel
] Engineering and Suogly Co. v. Hartford Accident ~ Inde~nitv Co ..
J 78 Cal. App. Jd J71, ]75 (1978): calistoga Ci'Jic Club v.
5 Calistoga, 143 cal. App. 3d 111, 117 (1983).
6 The principle of constructive trust situations are
7 covered by two general Code seccions. civil Code § 2223 provides:
8 "One who wrongfully detains a thing is an involuntary trustee
9 thereof, for the benefit of the owner." Civil Code § 2224
provides: "One who gains a thing by fraud, accident, mistake,
II undue influence, the violation of a trust, or other wrongful act,
r2 is, unless he or she has some other and better right thereto, an
13 involuntary trustee of the thing gained, for the benefit of the
person who would otherwise have had it." The wrongful act giving
15
1 The trustee of a bankruptcy estate has broad powers under the
16
Bankruptcy Code to "avoid" certain transfers of property made
17 by the debtor either after or shortly before the filing of the
bankruptcy petition. The property may be returned to the
18 estate for the benefit of all persons who have valid claims
against the debtor. In this case, all assets transferred from
19 the Debtor to the Armstrong companies should also be avoided
under section 54B.
20
Sections 548(a} (2) allows the trustee to avoid a transfer if
21 the debtor nreceived less than a reasonably equivalent value in
exchange for such transfer or obligation. n Section 548(a) (1)
22 permits the trustee to avoid any transfer made with "actual
intent to hinder, delay or defraud any entity to which the
23 debtor was or became ... indebted. " section 550 authorizes the
trustee to recover the transferred property from the initial or
24 subsequent transferee.
25 Any transfers of funds made by the Debtor to the Armstrong

Companies within the last year are avoidable as fraudulent
26 conveyances.

rise to a constructive trust need not amount to fraUd or
2 intentional misre~resentation. All that must be shown is thac ~~~
] acquisition of the property was wrongful and that the keeping of
the property by the defendant would constitute unjust enrichwent.
5 The remedy in constructive trust cases is to convey to the person
entitled the property held in constructive trust or to grant such
7 person an equitable lien. Calistoga at 117. The action is not
B dependent on the absence of adequate legal remedy. Heckmann v.
9 Ahrnanson, 168 Cal. App. 3d 119 (1985).
10 In the present case, the evidence clearly shows that the
11 assets of the Armstrong Companies are, in fact, those of the
12
Debtor obtained through various and numerous fraudulent
IJ
conveyances for which no adequate consideration was received.
14
As such, a constructive trust shouLd be imposed on these assets
in favor of the Debtor. Pending final jUdgment imposing a

15
constructive trust, injunctive relief should be granted preserving
16
the status quo of the assets. To fail to do so could irreparably
17
injure the estate's interests.
18
19
IV. THE INJUNCTIVE RELIEF APPLIES TO PARTIES OUTSIDE
THE TERRITORIAL JURISDICTION OF THIS COURT
20
The Trustee seeks to enjoin the transfer or disposition
21
of the assets of the Defendants even though arguably some of the
22
Defendants are not located within California. It is well settled
23
that a district court order has nationwide application and that
parties or non-parties who reside outside the territorial

25
jurisdiction of a district court are SUbject to that court's
26

jurisdiction if, with actual notice of the court's orde~, t~ey
2 actively aid and abet a violation of the order. Waffen£chnidt ..
3 Mackay, 763 F. 2d 711, 714 (5th Cir. 1985). This is so despi te :::e
J absence of other contacts with the forum. In this case, the
5 Defendants are Armstrong and corporations controlled by Armstron~.
6 Armstrong has ample contact with the forum state through his
7 affiliation with the Debtor. The Court should have no reluctance
B to grant the TRO to restrain Armstrong and his entities from
9 transferring assets that belong to the bankruptcy estate.
10 CONCLUSION
11 In sum, the THO should issue upon the strong evidence
11 that Defendants have acquired property from the Debtor herein
13 thr'ough fraudulent conveyances, without adequate cons idera t ion,
1<1 and the Trustee, acting on behalf of the creditors of the estate
15 of the Debtor herein, would suffer irreparable injury if the
16 injunction was not issued. A temporary restraining order should
17 therefore issue restraining Defendants from encumbering,
18
transferring or disposing of assets in their possession pending a
19: hearing on a preliminary injunction and the Court I s consideration
FELDMAN, WALDMAN & KLINE

A Professional corporation
BY~L. J • -,Chris Martiniak

Attoroeys for Trustee
Frederick s. Wy1e
-16-
- .
4/3/91
ssP
Mr. Baker:Vf?)
RE:
I}
CONNIE/C • .,ARMSTRONG, JR.,
'ft
ott;::
ASS_'
.C'C..Do
I
£CJ!j ',' --- i
1-
-
AKA CHIP~STRONG;
DBAvHAMILTON TAFT AND COMPANY;
32ND FLOOR, SPEAR STREET TOWER,
SAN FRANCISCO, CALIFORNIA;
FRAUD BY WIRE; MAIL FRAUD; TAX FRAUD;
00: SAN FRANCISCO
San Francisco has initiated a·Fraud By Wire

investigation based on information received from the former
Comptroller of Hamilton Taft and Company (HTC) that the sUbject,
Armstrong, has embezzled over $100 million from the firm's
clients over the last three years. ·These allegations continue to
be front-page news in San Francisco and on 3/15/91, the Wall
street Journal ran a front~page article detailing the allegations
(copy attached).
HTC contracts.with companies who owe taxes to numerous
state and local taxing authorities. Client companies make a lump
sum wire transfer of funds to the HTC account, and thereafter,
HTC issues checks to whatever taxing authority is owed money.
The former Comptroller, I I, has alleged that
Armstrong diverted lump sum payments to his own use and
thereafter, incurred penalties associated with late payments and
, ......
,r~
passed these costs along to the client companies who were not
notified of the late charges. In essence the allegation is that
Armstrong is running a "Ponzi scheme" of considerable magnitude
which requires increasing amounts of cash to keep the operat'on
going. J{: -3:!j
~
left HTC in Februar of 1991 and on 3
You will be kept apprised of pertinent developments.

NOT APPROPRIATE FOR DISSEMINATION TO THE PUBLIC
Enclosure
L.1flZs
1 - Mr. Jones 1 - Mr. O'Hara
1 - Mr. Baker 1 - Mr. Esposito
1 - Mr. Potts 1 - Special Assistants, eID
1 - Mr. Bryant
GDM:gdm/sw (9)
QdM~
1 LAW OFFICES OF
CHESTER L. BROWN
2 2450 Broadway, Suite 550
Santa Monica, CA 90404
3 (310) 315-6315
4 SOLOMON WOLLACK
388 Market Street, Suite 1080
5 San Francisco, CA 94111-5315
(415) 788-9000
6
Attorneys for Defendant
7 CONNIE ARMSTRONG, JR.
10
II UNITED STATES DISTRICT COURT
12 FOR THE NORTHERN DISTRICT OF CALIFORNIA
13
14
15 UNITED STATES OF AMERlCA, )

) CR 94-0276 CAL
16 Plaintiff, )
YS. ) MEMORANDUM OF POINTS AND
17 ) AUTHORITIES IN SUPPORT OF
) MOTIONTODIS:MISS COUNTS SEVE
18 CONNIE ARMSTRONG, JR. and ) THROUGH TWENTY-ONE; AND/OF
RICHARD A. FOWLES, ) REQUEST FOR PRETRIAL
19 ) INSTRUCTION AS TO LAW OF THE
Defendants. ) CASE
20 )
21
--------------- )
22 \\\
23 \\\
24 \\\
25 \\\
26 \\\
27
28
000112
1 INTRODUCTION
2 On March 12, 1996, CONNIE ARlvfSTRONG, JR. filed with this court a Motion To Dism
3 Counts For Legal and Factual Insufficiency. In the March 12 motion, defense counsel asserted that t
4 Ninth Circuit's opinion in In Re Hamilton Taft & Co. l commanded dismissal of certain counts of t
5 indictment. The Ninth Circuit opinion established that client monies, once transferred to Hamilton Tc
6 became the property of Hamilton Taft -- leaving the clients with no beneficial interest in those moni·
7 other than their contractual remedies against Hamilton Taft. In the March 12 motion, Mr. Annstro
8 sought to persuade this court that, under the Ninth Circuit's opinion, all counts speaking to "diversior
9 or misuse ofUclient funds," or other post-acquisition improprieties by Mr. Armstrong, must be dismissf
]0 This court denied that motion.'
11 Mr. Armstrong now brings the instant Motion To Dismiss Counts Seven Through Twenty-Or
12 based on the NInth Circuit opinion or the logic contained therein.lP To the extent that the instant moti,
13 overlaps with the March 12 motion, Mr. Annstrong asks this court to reconsider its earlier decisic
14 Reconsideration of this matter is appropriate, on the grounds that: (1) New information has come to lig
15 which bears on the existence or non-existence of a scheme to defraud -- specifically, the fact that defer
16 counsel has now confirmed that Hamilton Taft p·aid all taxes, in compliance with its contractual dutie
17 (2) Because the indictment in this case pre-dated the Ninth Circuit opinion, there is a strong possibil
18 that counts seven through twenty-one are based on an erroneous premise of law - a possibility ev
19 recognized by the government itse1£ which sought to get the Nmth Circuit opinion reversed; (3) Allowi
20 lay jurors to believe that Hamilton Taft was a fiduciary for their withholding taxes is not only lega
21
22 In Re Hamilton Taft & Co. (Wyle v: S & S Credit Co., Real Parties in Interest), 53 F.
285, vacated on other grounds, 68 F.3d 337 (1995) is attached as Exhibit A.
2
Because the Ninth Circuit has vacated its opinion in In Re Hamilton Taft, the partie~
24 the instant case disagree over the extent to which that opinion controls in this case. ~
Armstrong contends that, since the opinion exists and since it addressed a factual situat:
25 identical to the one at issue in this cnminal case, its logic cannot be ignored -- regardl
of the technical question of whether or not the opinion is still controlling per se.
26
3
Since the March 12 motion, defense counsel has had a chance to review the records
27 the Internal Revenue Service, as well as the schedules of the government's own farer
accounting expert, Lee Baly, which show that, except for the first quarter of 1991 wI
28 the company was involuntalily shut down, Hamilton Taft paid all its clients' withhold
taxes for each quarter.
2 000113
1 incorrect) but would cause tremendous prejudice and would constitute reversible error; (4) Clarificatio
2 of this issue, through dismissal of counts or, at a minimum~ instructions to the jury, will save time, b
3 allaying defense counsel's need to put on evidence about the character of funds and preventing constar
4 interruption of the proceedings with defense objections to the government's improper characterizatio
5 of those funds; and (5) This court's recent comments at the September 12, 1996 hearing suggested the
6 further clarification may be warranted, concerning the applicability of the Ninth Circuit opinion to count
7 seven through twenty-one of the instant case.
9 STATENfENT OF FACTS
10
11 A. DESCRIPTION OF HAMILTON TAFT'S BUSINESS --
12 Hamilton Taft was a California corporation which provided payroll services for large businesse~
13 such as Federal Express, Scott Paper) and The State Bar of California. Under the federal and state ta
14 laws, employers are required, every pay period) to withhold from each employee the estimated amoun
15 which the employee owes in federal , state, and local taxes, for that pay period. This system, in whic:
16 employers are charged with the duty of withholding and paying taxes on behalf of their employees, i
17 believed to enhance the ability of the Internal Revenue Service to collect income taxes from all taxpayer~
18 However, because ofthe complex and ever-changing laws and regulations which govern the withholdin
19 tax system., many companies choose to utilize the services of payroU processing finns, such as HamiJto
20 Taft.
21 Under the terms of Hamilton Taft's contracts , employers were required) each pay period, r·
22 deposit with Hamilton Taft an amount equal to the total amount of employee withholding taxes due fc
23 that pay period to federal) state, and local tax authorities. Hamilton Taft would then fill out all ofth
24 proper paperwork and write a check to the various taxing agencies, on behalf of its client. In additior
25 Ha.m.iJton Taft also prepared quarterly withholding tax return fOnTIS (Forms 941) o~ behalf of its client:
26 The 941 forms are due thirty days after the end of each quarter and declare, under penalty of perjury, th,
27 all employee withholding taxes have been paid for the previous quarter.
28
000114
3
By the tenns of its contracts, Hamilton Taft assumed responsibility for all penalties and inten
2 resulting from any late payment of client withholding taxes. In rerum for these services, Hamilton T~
3 would generally receive no fee, but would be entitled to any benefit obtained from the temporary use
4 these monies (often referred to as the Ufloat"), between the time that Hamilton Taft received the mom
5 and the time it paid them over to the appropriate taxing agencies. With but one or two exceptions. t
6 client contracts contained no language limiting the types of investments which Hamilton Taft was entitl
7 to make with funds deposited by clients.
10 B. HAMILTON TAFT BEFORE CONNIE ARMSTRONG --
11 Hamilton Taft was initially incorporated in July, 1979 as KnightsBridge Systems, Ltd., I:
12 changed its named to Hamilton Taft in 198 L In 1984, Hamilton Taft was acquired by CIGNA, a ma~
13 insurance company from Connecticut. Despite CIGNA's continuing efforts to pump its own funds ir
14 its subsidiary companYl Hamilton Taft continued to lose money under CIGNA' s ownership. Finally,
15 Januazy, 1988, CIGNA sold Hamilton Taft to MaxPharma, a publicly held corporation from Dallas.
16 Under MaxPharrna' s ownership, Hamilton Taft 1 S liabilities grew wo rse, hastened by the fact tl
17 MaxPharma ' s owners made unsecured loans to themselves without the approval of MaxPharm
l
18 shareholders. Connie Annstrong, a shareholder in the parent company, brought a shareholder derivat
19 suit against MaxPhanna and its principles, alleging a breach of their fiduciary duty to shareholders.
20 March 29, 1989, Roberts and MaxPharma settled the suit, by transferring all stock in Hamilton Taft
21 Mr. Armstrong, who became sale owner of the company. At the time he took over the compa
22 Hamilton Taft's liabilities exceeded its assets by $18.9 million.
23
24 ·C. THE MISSED TAX DEPOSITS --
25 Because Hamilton Taft had approximately 250 corporate clients with varying payroll schedu
26 it received incoming funds from clients every day and, by the same token, had payroU tax deposits I
27 evezy day. Most ofthe time) Hamilton Taft paid these withholding tax deposits before the statutory
28 date. However, on one or two days per quarter, Hamilton Taft was forced to hold back client
4 000115
.-
1 deposits due to insufficient funds; as a result of these missed deposits, Hamilton Taft incurred intere
2 and penalties, for which it was liable. Hamilton Taft subsequently made up every missed tax deposit f
3 1989 and 1990 -- usually doing so just before 941 tax returns were due (thirty days after the quarter
4 end). In accordance with its contractual obligation, Hamilton Taft paid all penalties and interest ansit
5 from its late payment of these client tax deposits. 4
6 To make up the missed tax deposits, Hamilton Taft would generally use incoming monies, pa
7 by clients in the foUowing quarter. Because Hamilton Taft needed these newly incoming funds to mal
8 up the previous quarter's missed deposits, those same funds were unavailable for use in the quarter
9 which they were submitted. This, in tum, forced Hamilton Taft to hold back additional tax deposits
10 that quarter. However, at the time they deposited funds with Hamilton Taft, clients understood that tht
11 monies would not be segregated or earmarked for immediate payment to the IRS and funher undersroc
12 that they would never be held liable for late payment of their withholding taxes.
13
14 D. THE TRANSFERS OF HAMILTON TAFT FUNDS --
15 The primary issue in the instant case involves Mr. Armstrong's wire transfers of approximatt
16 $55 million of Hamilton Taft monies to his Texas companies, in exchange for notes (and later a sinE
17 consolidated bond) of equal value. The Texas companies, whose payroll included experienced expel
18 in real estate, construction development, oil, and investment financing, then invested these mOrnl
19 pledging these investments back to Hamilton Taft as collateral for the loans. Mr. Armstrong hoped tf
20 after several years, these investments might be sold for substantial gain, which could then be put back ir
21 Hamilton Taft and applied against the $18.9 million "hole" which he inherited.
22 The government contends that Hamilton Taft's occasional missed tax deposits were brought
23 by Mr. Armstrong's inter-company transfers ofHanulton Taft funds. In counts seven through eightc
24 of the indictm~nt, they charge Mr. Armstrong with wire fraud, in connection with his supposel
25
26 4
Though Hamilton Taft made up missed tax deposits just before filing the client's 941 .
returns, it did not nonnally make up penalties and interest until receiving notice from
27 IRS requesting such payment -- a process which usually did not occur until about t
quarters later. As a -result, Hamilton Taft was technically about two quarters delinqu
28 on interest and penalties, at the time of its shutdown -- though it had not yet, at that til
received notice from the IRS as to these penalties.
5 000116
1 improper "diversions" of client funds. Counts nineteen through twenty-one further allege a ucover-u
2 'by Mr. Armstrong afhis supposed misuse of client monies .

..,
..)
4 E. THE RUN ON THE BANK--
5 On March 8, 1991, Steve Solodoff, a disgruntled ex-employee, called a clandestine meeting
6 Hamilton Taft clients, at which he alleged that Mr. Armstrong had "diverted" millions of dollars
7 Uclient" monies, that Mr. Armstrong was running a massive "Ponzi" scheme with other people's monit
8 and that Mr. Armstrong was likely preparing to leave the country, taking the rest of Hamilton Taft
9 money with him. (See memorandum presented to Hamilton Taft clients, entitled, "Hamilton Taft
10 Company, Description of Fraud," attached as Exhibit B).
l1 As a result of Solodoff's tortious allegations, Hamilton Taft's clients simultaneously breachl
12 their contractual duties to Hamilton Taft, by ceasing to deposit funds with the company, without givil
13 the contractually required thirty-day notice of termination. This sudden and massive breach by virtua.
14 aU of its clients, followed shortly thereafter by the involuntary bankruptcy proceedings and forced shl
15 down of Hamilton Taft's business by trustee, Fred Wyle, left Hamilton Taft with approximately $:
16 million in overdue taxes, which it was unable to make up.
17 After his appointment, Wyle shut down all of Hamilton Taft's business activities and sold all
18 the assets pledged back to Hamilton Taft. Because most of these assets were sold at a firesale value, a·
19 never given a chance to mature to their potential value, the proceeds were insufficient to make I
20 Hamilton Taft's existing tax liabilities.
21
22 PROCEDURAL mSTORY OF NINTH CIRCUIT DECISION

23 In March, 1991, shortly before being placed in involuntary Chapter 11 receivership, Hamilton T
24 paid $7.6 million in taxes, on behalf of its client, S & S Credit. During the subsequent bankrupt
25 liquidation, trustee Fred Wyle sued S & S Credit, seeking to set aside this pre-bankruptcy transfer,
26 the grounds that the monies paid were the "property of the debtor {Hamilton Taft}," and therefc
27
28
000117
6
recoverable under the bankruptcy preference laws. S S & S opposed the suit, arguing that the money w
2 not property ofthe debtor, since Hamilton Taft held client monies in a statutory trust, for the benefit
3 the United States, under Internal Revenue Code § 7501. 6 The Bankruptcy Court ruled in favor of S
4 S Credit and was affinned by this court, in a February 18, 1993 opinion stating that, "The payments we
5 as a matter of law funds held in trust for the Internal Revenue Service and were not the property of t:
6 debtor Hamilton Taft & Company.Jl (See written opinion of this court, attached as Exhibit C). Betwe,
7 the time of this court's opinion and the time of the subsequent reversal by the Ninth Circuit, Iv
8 Armstrong was indicted by a federal grand jury on twenty-one counts of fraud.
9 On May 2, 1995, the Ninth Circuit issued a published opinion, reversing this court and holdil
10 that, under common law trust principles, the statutory trust created by § 7501 dissolves when the trust
11 transfers trust property to a third party -- in this case, Hamilton Taft. Furthermore, the Ninth CirCt
12 refused to impute to Congress an intent to abrogate these common law principles, through enactment
13 § 7501. The court) therefore, concluded that Hamilton Taft did not hold these momes in trust, for t
14 benefit of the m.S.
15 The Ninth Circuit also rejected any suggestion that Hamilton Taft held monies in trust for t
16 benefit of either the client or the tax-paying employee:
17 Nor does S & S attempt to show that it arranged with Taft for the
transferred funds to be held in trust. Whil e two of Taft's eli ents arranged
18 to have their trust-fund tax payments kept in segregated accounts, S & S
and the other clients did not. Instead, Taft extensively commingled all of
19 the funds it received and treated the funds as its own assets, using them
to pay its operating expenses and investing the funds for its own benefit.
20 Therefore, under ordinary principles oftrust Taft did not hold the funds
1
in trust.
21
22 Id., at 288.
24
25 5
11 U.S.C. § 547(b) allows the bankruptcy trustee to avoid transfers to or for the be
of a creditor and made within 90 days of the bankruptcy, when such transfers invo
26 U an interest of the debtor in property.11
27 6
IRe § 7501 states that, cCWhenever a person is required to collect or withhold any inti
revenue tax from any other person and to pay over such tax to the United States
28 amount of the tax so collected or withheld shall be held to be a special fund in tru!
the United States."
7
000118
...
1 Thus, the court concluded that the transferred funds were indeed the property of Hamilton Ta
2 with all of the correlative rights that property ownership entails. As a result, the court held it prop'
3 under § 547, to set aside the pre-bankruptcy transfer and return the transferred funds to the Ham.ilt
4 Taft bankruptcy estate. S & S Credit promptly petitioned the court for rehearing.
5 On May 23, 1995, the Nmth Circuit ordered the United States to file an amicus brief] addressi
6 I the limited issue of whether the May 2] 1995 opinion might adversely affect the ability of the IRS
7 collect federal taxes. In August, 1995, the United States filed its amicus brief: siding with S & Scree
8 and arguing that Hamilton Taft held monies in statutory trust, for the benefit of the IRS. The brief v
9 submitted by three attorneys out of the Tax Division of the United States Department of Justice
10 Washington D.C.] but also indicated that Michael Yamaguchi] United States Attorney for the North!
11 District of California, had been consulted in an Hof counsel" capacity. (See excerpts of United Sta
12 amicus brief, attached as Exhibit D).
13 The Ninth Circuit neither granted nor denied the Petition for Rehearing, as the case settl.ec
14 September, 1995. On October 12 1995, the court dismissed the entire appeal as moot and vacated
1
15 earlier published opinion.
16
17 ARGUMENT
18 I. TIIE NlNTH CIRCUIT'S LEGAL CONCLUSION ABOUT THE CHARACTER OF Fill

HELD BY HA1v1IL TON TAFT REQUIRES DIS:MISSAL OF COUNTS SEVEN THROl
19 TWENTY-ONE OF THE INDICTIvlliNT.
20 A. :HA.MRTON TAFT fULFn..LED ALL OF ITS CONTRACTUAL DUTIES -

21 At the hearing on Mr. Armstrong's previous motion to dismiss counts, and more recently) a
22 September 12 hearing, this court expressed skepticism about the relevance of the Ninth Circuit's op
23 to the issues in the instant case. At the September 12 hearing this court expressed its concern the
l
24 Ninth Circuit decision merely held that Hamilton Taft did not hold funds in trust, vis a vis the lR~
25 that the opinion took no position on whether those funds were held in trust, as to the client com~
26 themselves. However, after subsequent discussion, this court seemed to acknowledge that perhaps
27 remains a need to clarify the precise meaning of the Nmth Circuit opinion, as well as its possible i:
28 on Mr. Armstrong's criminal case. With a1J due respect, Mr. Annstrong believes the Ninth (
8 000119
holding to have been broader than this court initially believed and, to the extent that this coun has four
2 otherwise, he asks that it reconsider its decision.
3 While the Ninth Circuit did make clear that § 7501 IS statutory trust vis a vis the IRS does nc
4 extend to third party transferees, it then went on to examine the understanding which existed betwef
5 Hamilton Taft and its clients:
6 Nor does S & S attempt to show that il arranged with Taft for the
transferred funds to be held in trust. While two of Taft's clients arranged
7 to have their trust-fund tax payments kept in segregated accounts, S & S
and the other clients did not. Instead, Taft extensively commingled all of
8 the funds it received and treated the funds as its own assets, using them
to pay its operating expenses and investing the funds for its own benefit.
9 Therefore 'under ordinary principles of trust, Taft did not hold the funds
1
in trust.
]0
]1 Jd., at 288.
]2 The above language has nothing to do v..rith the existence or non-existence of a trust, on beh,
13 of the IRS, but speaks only to the relationship between the contracting parties themselves. 7 Th
14 relationship, the court concluded, was not a trust, but was a traditional debtor-creditor relationship, und
15 which the monies, once transferred, became the property of the debtor, Hamilton Taft.
]6 I Of course, the fact that Hamilton Taft's contractual relationship with clients was debtor-creditJ
17 rather than trust, does not nullify the possibility of criminal fraud. For instance, had Mr. Armstro
18 simply taken clients' monies and opened a Swiss bank account, while totally ignoring rus contractual d·
19 to pay their taxes, he almost certainly could be charged with engaging in a scheme to defraud. 8 Howe,
20 the debtor-creditor nature ofHamilton Taft' 5 relationship does have inescapable implications, for cer1
21
22
23
7
It is worth pointing out that, under § 7501, employers hold their employees' tax mo
24 in trust for the benefit of the IRS, not the employees. Therefore, the monies w
employers contractually agreed to transfer to Hamilton Taft were never trust mOrlll
25 the first place vis a vis the tax-paying employees.
26 The Nmth Circuit has held that a scheme to defraud is completed at the moment tha
money at issue changes hands. United States v. Cusino, 694 F.2d 185, 187 (9th
27 1982). Given this rule of law, even if Mr. Armstrong had wired Hamilton Taft me
overseas, it is not at all clear whether such conduct would constitute mere evidence·
28 I
intent never to perfonn his ~ontractual duties Of, as the government apparently \\
contend, an independent criminal act.
9 000120
..
counts in this case. 9 First it meant that, as a matter of law, client monies, once delivered to Hamilt
J
2 Taft, became the property of Hamilton Taft. This, in tum, meant that Hamilton Taft was free to use t
3 money for operating expenses or to invest it for its own benefit, in any manner it wished -- wh
4 remaining cognizant of the fact that the company also owed a contractual duty to pay the dien'
5 withholding taxes. Second, the debtor-creditor relationship meant that Hamilton Taft could fret
6 commingle the tax monies of any particular client with the monies of ali other Harrulton Taft clients:
7 was not necessary that any single client's monies be placed in a separate, segregated account. Hem
8 what the government calls a uponzi ll scheme - the payment of Client A's taxes with Client B' s a
9 Client C's money - was not only permissible) but was exactly what Hamilton Taft's cliel!ts bargained f{
10 Third, the debtor-creditor relationship meant that clients retained no beneficial interest in the money, on
11 delivered to Hamilton Taft - having only their contractual rights against Hamilton Taft on which to re
12 The clients' contractual rights in this case were quite simple; Hamilton Taft was obligated to p
13 all client withholding taxes and to assume liability for any penalties and interest resulting from [,
14 payment. Hamilton Taft complied with these contractual duties for every quarter of 1989 and 1990
15 occasionally paying the taxes late, but assuming the penalties and interest for so doing. In the fi
16 quarter of 1991, Hamilton Taft missed certain taX deposits, just as it had done in previous quarters. ]
]7 as in previous quarters, Hamilton Taft had every intention of making up these rrussed payments,
18 would have done so, but for two key events: (1) the public allegations made by Steve Solodoff wh
19 caused the bulk of Hamilton Taft clients to simultaneously breach their contractual duties, ther·
20 suddenly and completely cutting off all cash flow to Hamilton Taft; and (2Ube March, 1991 appointIT
21 of Fred Wyle as trustee in bankruptcy, and the subsequent shutting down ofHarrulton Taft's busir
22 operations. This double-barreled assault left Hamilton Taft unable to make up approximately $50 mil
23 in overdue tax liabilities, which were to have been paid in April, 199~~i
24 In view of the debtor-creditor nature of Hamilton Taft's contracts, coupled with the fact
25 Hamilton Taft perfonned its contractual duties without fail (when allowed to do so by the clients),
26
27 9
Indeed, the government itself seems to recognize that the Ninth Circuit's dec:
negatively impacts their criminal case against Mr. Armstrong. This would explain
28 IRS attorneys consulted Michael Yamaguchi himself, in an "of counse]" capacity, ,
the IRS was preparing its amicus brief seeking to reverse the Ninth Circuit's decisi
10 nnn1t)1
difficult to see exactly what aspect of Mr. Armstrong's conduct the government views as frauduiem
2 Counts seven through fourteen speak of "diversions" -- a term which implies misuse of monil
3 However, Hamilton Taft was certainly free to lend its own money to sister corporations or to invesi
4 for its own benefit, provided it paid the clients' taxes. Hamilton Taft's contracts did not hold Iv
5 Armstrong to any LLprudent investor standard" and did not, in any way, set parameters on the range
6 pennissible investments which Hamilton Taft could make. That Mr. Armstrong's companies may ha
7 incurred excessive operating costs (in the govemmenf s view), or that some of his investments may ha
8 depreciated in value, do not amount to criminal conduct~ in fact, absent a failure to pay clien
9 withholding taxes, this conduct does not even constitute a breach of Hamilton Taft's contractt
10 obligations.
II Similarly, counts fifteen through twenty-one allege improper diversions and a "cover-up" of the
12 improper diversions -- conduct which, again, might arguably constitute evidence of Mr. Annstron!
13 intent never to perfonn, but which cannot itself be criminal conduct. If monies, once delivered
14 Hamilton Taft, became Hamilton Taft property, there can be no "misuse" of such property vis a vis eli·
15 companies who have already surrendered all proprietary rights in those monies. Rather, the sole quest
16 for the jury to decide is whether Mr. Armstrong fraudulently induced clients to do business with HamJl'
17 Taft, by making representations which he never intended to honor.
18
19 B. TIllS WAS NOT A uPONZltI SCHE1V1E-
20 Since Hamilton Taft fulfilled its every contractual duty -- to the extent that clients allowed tf
21 to do so -- one might well ask: Wherein lies the so-called scheme to defraud? The government sel
22 to be of the opinion that Mr. Armstrong was operating a uponzi" scheme. IINot so, says the easel
If
23
24
25 10
Counts one through six allege that Mr. Armstrong fraudulently induced clients tc
business with Hamilton Taft, by misrepresenting the ways in which Hamilton Taft WI
26 invest its monies. While Mr. Armstrong intends to prove his innocence of these cha
at tri~ he admowledges that the Nmth Circuit opinion does not require dismissal of f
27 counts, as a matter of pure law. The Ninth Circuif s conclusion that monies wen
property of Hamilton Taft means that, while Mr. Armstrong may be charged
28 improprieties in the acquisition of such monies, he should not be charged in conne,
with conduct that post-dates his allegedly fraudulent acquisition of monies.
11 nOf\1r)f)
1 "A Ponzi scheme is a fraudulent arrangement in which an entity makes payments to investors fn
2 monies obtained from later investors rather than from any 'profits' of the underlying business ventur
3 In re United Energy Corp. 944 F.2d 589 (9th Cir. 1991). The term stems from the late Charles Par
4 a colorful and flamboyant swindler of the 1920s. Ponzi induced would-be investors to give him man
5 in order to buy foreign postal coupons, which he would then purportedly sell in other countries at ]O(
6 gain. In return for their money, Ponzi gave "investors" 90-day notes, which he would promise to re~
7 at 150% of face value. Though no foreign postal coupons actually existed, Ponzi continued to hor
8 these 90-day notes as promised, using other investors! monies to do so, and thereby causing his o'
9 debts to spiral exponentially. See Cunningham v. Brown, 44 S.Ct. 424 (1924).
l O i n United Energy, the principles sought to induce investors to purchase shares of solar enel
11 modules, by way of a down payment and annual or semi-annual installments. Though the modu
12 actually produced only a negligible amount of energy, the principles paid investors occasional sums
13 money, which they represented to be returns on investment. This, in tum, caused the initial investor~
14 continue making payments to United Energy, while also causing new investors to finance the ph(
15 project. This new money could then be used to partially pay back the old investors, in order to mak
16 appear that the venture was a success.
]7 The schemes in both Cunningham and United Energy, while holding themselves out to
18 legitimate business ventures, were nothing more than textbook Ponzi schemes, in which no investrr
19 ever existed. Conversely, Hamilton Taft's stated purpose was to provide payroll services, and it did
20 Of course, given the $18.9 million hole which he inherited, as well as the continuing interest
21 penalties attributable to that hole, it was inevitable that Mr. Annstrong would have to use newly incon
22 monies to payoff pre-existing liabilities -- holding back more tax deposits in the process Moreo'
23 unlike CIGN~ which had been able to dip into its own abundant coffers to cover Hamilton Ie
24 escalating liabilities, Mr. Annstrong did not have this luxury. As a result, his only chance of til
25 Hamilton Taft's pre-existing hole, was to invest a small percentage of Hamilton Taft funds in investm
26 which, while containing some element of risk, also had the potential for tremendous returns.
27 decisions to hold back checks and to payoff old liabilities with incoming funds did not constitute a P
28
12 000123
-
1 scheme, but were simply business decisions which were not only contractually permitted, but we
2 contemplated by the clients at the time they entered the contracts.
3 In a Ponzi scheme, the victims believe they are putting their monies into an investment, althou
4 no investment exists at all. In the instant case, clients believed that Hamilton Taft would pay their taxi
5 as well as any penalties and interest, and Hamilton Taft did so -- until the clients themselves completl
6 shut off Hamilton Taft's cash flow, based on the unconfirmed allegations of a disgruntled ex-employ'
7 Indeed, it is dowruight remarkable that Mr. Armstrong now faces federal felony charges for missing 1
8 payments which his ovm clients (the supposed victims in this case) left him totally unable to make. T
9 $50 million in unpaid 1991 taxes is an_artificial creation of the clients themselves -- brought about by th
10 own sudden and unilateral decision to freeze Hamilton Taff 5 cash flow. These clients have stolen 1\
11 Armstrong's keys and pushed his car into a ditch, yet are now complaining that Mr. Armstrong cam
12 drive them to the show.

l1
13 The government's u evidence of a Ponzi scheme stems solely from the fact that, in continuing
14 hold bac~ tax deposits to pay off their pre-existing debt, Hamilton Taft was incurring more and me
15 penalties and interest) thus creating the need to hold more and more future tax deposits. At worst, t
16 conduct constitutes profligate money management by Mr. Armstrong -- the stuff of shareholder pre
17 battles, but not of criminal indictments. If Mr. Armstrong can be criminally charged for running
18 increasing bills for his company, then so too can every home owner who defaults on his loan, or ev
19 corporation whose debts exceed its assets.
20 The truly arbitrary nature of this case is best captured by a rhetorical question: Would:
21 Armstrong be facing criminal charges today if one or two of his investments had reaped grand retu
22 enabling him to fill Hamilton Taft's pre-existing hole? Surely 1v1r. Annstrong' s is not the first busiJ
23 ever to make risky investments, with monies paid to it by clients. Nor is it the first business to perf
24 some of its contractual duties late. And Mr. Armstrong is not the first CEO ever to enjoy a boun
25 I lifestyle while his company struggles to become profitable. What, then) elevates this case from a I
26 civil dispute to a 21-count federal fraud indictment? Hamilton Taft's clients, with more than a little
27 from Fred Wyle and the Bankruptcy Court) arbitrarily chose to shut down the company befoT
28 investment program had reached fruition. With Hamilton) s Taft's business activities frozen in tim~
13 000124
-
government then called on its high-priced accountants, who summoned their mystical powers
2 projections, spread sheets, and mathematical assumptions, to create a loss where none actually existl
.., Aided by such sorcery, the government was able to transfonn Hamilton Taft from a mere non-profital
.J
4 business into a criminal <·Ponzi" scheme.
5 In short, Hamilton Taft contracted to perform a service for its clients and it did so. If the die1
6 believe Hamilton Taft's late performance to be a contractual breach, let them sue Mr. Armstrong in ci
7 court. lfCongress wishes to expand the common law of trusts to include payroll processing compani
8 let them change the law. If the government believes Mr. Annstrong committed fraud in the inducemt
9 (as alleged in counts one through six), let them prove it at trial. However, to allege that Mr..A.rmstro
10 was <4diverting" funds which were his own property; or committing a Ponzi scheme. while giving I
11 clients the very service they contracted for; or that he "covered up" a scheme which, by definition, WOl
12 have been completed at the moment clients signed their contracts, is illogical, excessive, and Iota
13 prejudicial to Mr. Armstrong' 5 right to a fair trial.
14 Counts seven through twenty-one should be dismissed.
15
16 II. AT A MINIM1JM, THIS COURT SHOULD DECLARE THE NINTH CIRCUIT HOLDI1'
TO BE THE "LAW OF THE CASE" IN MR. ARMSTRONG'S CRllv1INAL TRIAL.
17
18 Even if this court does not view the Nmth Circuit's opinion as dispositive of certain counts of 1
19 I indictment, defense counsel at least urges that this court issue an order declaring the Ninth Ci~cuit' s.le;
20 conclusions to be the law of this criminal case. Such an order would mean, inter alia, that:
21 1. Defense counsel may refer to the monies at issue, in both opening and closing statemer
as the property of Hamilton Taft or Hamilton Taft cash flow.
22 ll
2. The goverrunent may not refer to those monies as "client monies" or "client funds (;
23 may not state or imply that Hamilton Taft held those monies in trust.
..,
24 J. The government may not present evidence of any advice which Mr. Armstrong receiv
from la'W)'ers or other experts, to the extent that such advice was inconsistent with
25 state of the law, as set forth in the Ninth Circuit's opinior:.
26 4. This court will instruct the jury that monies, once delivered to Hamilton Taft, became
property of Hamilton Taft. -
27
5. This court will instruct the jury that Hamilton Taft was free to use its cash flow to co
28 its operating expense or to mvest those monies for its own benefit and in any wa
wished.
14 0001?S
1 6. This court will instruct the jury that Hamilton Taft's sole duties to its clients were the
duties stated contractually but that clients were free to sue for breach, if Hamilton T
2 ever failed to live up to those duties. .
...,
J
liThe law of the case doctrine 'ordinarily precludes a court from fe-examining an issue preyiou
4 decided by the same court, or a higher appellate court, in the same case.' II United States v. Catenn 0,
5 F.3d 1390, 1395 (9th Cir. 1994) (citations omitted). The doctrine "refers to a family of rules embodyi
6 the general concept that a court involved in later phases of a lawsuit should not re-open questions decic
7 ... by that court or a higher one in earlier phases." Crocker v. Piedmont A viation, Inc., 49 F.3 d 7:
8 739 (D.C. Cir. 1995). {emphasis added}. Law of the case is primarily an equitable principle and, un!:
9 the principles of collateral estoppel and res judicata, is applied at the discretion of the COlin. Howev
]0 as the Ninth Circuit has observed, it is a principle which IIshould not be applied woodenly in a \\
11 inconsistent with substantial justice." United States v. Miller, 822 F.ld 828 (9th Cir. 1987).
12 In the instant case, there are arguable technicaJ reasons why the Ninth Circuit decision should r
]3 constitute the law of Mr. Annstrong's criminal case. The first such reason is that the decision \)
14 vacated after the parties settled out of court. The second is that the parties to the instant case are not
15 same as the parties to the civil dispute from which the Ninth Circuit's opinion arose. Putting aside th
16 technicalities, it is hardly a matter of dispute that the Ninth Circuit decision arose from the exact sa
]7 facts, circumstances, and issues as those that will be presented in this case. While the opinion has b·
18 vacated, it continues to stand as both a scholarly, lucid, and unassailable explication of the common
19 of trusts, as well as a "cheat sheet," which allows this court to see how the Ninth Circuit will rule, she
20 this issue comes before it again. Under these circumstances, it flies in the face of common sense to ref
21 to acknowledge the Ninth Circuit's reasoning and to pretend the opinion does not exist.
22 To simply leave this matter as a factual free-for-all, to be sorted out by the jury, is not only leg
23 erroneous, but also grossly prejudicial to :Mr. Armstrong. The character of the funds at issue is a
24 component of this case and is a matter of pure law, as even this court acknowledged in its Febru
1993 opinio~ were this merely a factual issue, the Nmth Circuit never would have addressed it in the
25
26 place. Because these funds were Hamilton Taft property, as a matter of law, the jury should be instru
27 that this is the case. Simply allowing the defense to present evidence that these were not trust funds
28 leave in the hands oflay-jurors the task of dissecting and applying subtle nuances of law, on which
-----~ ~15~ (\ () f\ 1 ') ~

IIIiI
Mr. Armstrong's own attorneys could not find consensus. After hearing the government refer to tht
2 funds as tldient funds," "trust funds," or "withholding funds," lay-jurors surely cannot be expected
3 understand defense counsel's highly technical arguments about commingling of funds, statutory trus
4· and third party transferees. Without a clear instruction to this court that funds transferred to Hamilt
5 Taft became Hamilton Taft property, the jury wilJ be only too ready to wrongly believe that these fur
6 were withholding monies, and that Hamilton Taft was held to the same fiduciary duty that their 0'
7 employers have.· To allow jurors to make such an inference would be grossly prejudicial and devastati
8 to Mr. Armstrong's case.
9 While Mr~ Annstrong was not himself a party to the Ninth Circuit's case, that case was
10 adversary proceeding which arose out ofthe same bankruptcy as the one which led to this criminal ca
11 By the same token, the facts which led to the Nmth Circuit's conclusions of law (that no trust existed,
12 that Hamilton Taft's relationship with clients was debtor-creditor) are the identical facts now at iSSUE
13 this criminal case. Adopting the Nmth Circuit's opinion as the law of this criminal case is consistent \\
14 the principles of flexibility and efficiency with which the law of the case doctrine is customarily appli
15 Should this court be reluctant to dismiss counts seven through twenty-one, pursuant to the Ninth eire
16 opinion, 1v1r. Armstrong requests that it at least take the lesser step of declaring the Ninth Circuit's le
17 conclusions to be the law oflvlr. Armstrong's criminal case -- with all of the ramifications which t
18 finding would entail.
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W 1 DEFENDANT ARMSTRONG'S PROPOSED SPECIAL INSTRUCTION 5
3 With respect to the funds paid to Hamilton Taft by the client companies, with the exception of
4 two clients who arranged to have their payments kept in separate accounts, the funds paid to Hamilton
5 Taft became the property ofHarniJton Taft and could be commingled by Hamilton Taft, treated by
6 Hamilton Taft as its own assets, used to pay Hamilton Taft's operating expenses, and invested by
7 Hamilton Taft for itsown benefit. Hamilton Taft did not hold the funds in trust as your employer might
8 hold your withholding taxes. In other words, Hamilton Taft was entitled to the use of the funds until
9 the taxes were due to be paid, pursuant to the tenns of the contract.
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26 Based on: 1I1 Re HamBlon Tail & CD., 53 F.3d 285, 288 (9th Cir., 1995), vacated due to mootness,
27 68 F.3d 337 (1995); Restatement (Second) of Trusts § 283 (1959); Austin W. Scott & William
28 Fratcher, The Law ofTOlsts § 283 (4th ed. 1989).
I
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000169

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THE WHITE HOUSE

Office of the Press Secretary

For Immediate Release July 29, 1993

PRESIDENT NOMINATES EIGHT U.S. ATIORNEYS

The President nominated eight individuals to be U.S. Attorneys today:

Eric H. Holder, Jr., for the District of Columbia

Eric H. Holder, Jr. has been an Associate Judge on the

of2 5/7/2009 2:59 p~

~~q~1~ GRADUATED COLLEGE WITH B.A. AND DEGREE IN LAW

WENT TO WORK AS ASSISTANT U.S. ATTORNEY

WORKED FOR 13 YEARS, UNTIL 1993 AS AN ASSISTANT U.S. ATTORNEY

1993 APPOINTED BY CLINTON U.S. ATTORNEY FOR NORTHERN CALIFORNIA

1ST YEAR: 93-94: APPOINTED U.S. ATTORNEY

To SAC, SAN FRANCISCO Dale 1/28/94

From SA WILLARD L. HATCHER, JR. (196A-SF-93255) (P)

SubJccl CONNI:.E CHIP ARMSTORNG, JR j

Enclosed for the file is a facsimle copy of the

FACSIMILE LEAD SHEET

Firm: Federal Bureau of lnvesbgation

Client: Hamilton Taft & Company I

Please call (415) 574-1900 if an error Ot;CUI'$.

April 10, 1989 Dallas c.aunty, '1'exas $18,962,255 .. 00

J'OI VALDB RBCBIVlJ) I th. undersiqned (the ItMakar R ) promises to

Maker shall pay to Halder hereof quarterly installments of

Ma.kar hereby pledg«as to Holder, as security for the full and

PROMISSORY NotE - p_ge 1

Dr Wl:'rDU 1IJ.KKRB01", tha Maker bali caused i::.his promi~sory Note

DUS~ mrl'BJlPnBB8, DlC.,

fBOKliSOBY NOTE - page 3

.... ": c ....... :.

Oct::=.er 19, 1981

Mr. :·1 arc Pa i Va

Re: C~ar2c~erization of Fu~cs Kichheld by ~mployer

Per your request, this letter Q1SCUSses the characteri-

An employer is required to ~ithhold Erom the wages of

Characterization of Withheld Funds

Funds that 2re withheld or c~llected as income tax or

U. s. ..' . I-! i 2 1, J 6 8 F. 2 d 6 1 7 t 66- 2 a.:. S • T . C. ~(9 7 3 6 at 873 82 (5 t h

~ :. : • I .i 9 6 6}. =- ~ :-: ci s ~ hat: are ~t : :: ~ e 1d c- r :::: __ -= C 1: e des s 'to ate

13070J; ~hile =~~ds withheld as unemclovmen~ :nsurance tax

A trustee has a general duty to invest funds for the

~o consent ~o ~arious kir.cs at invest~encs. Th; =~se c:

The Court first determined that the impound accounts

The statute and cases indicate that the trust funds

~ole of Collectino Ager.~

The normal penalty for a breach of fiduciary duty by a

The test is "willfullness." Basically, "willfullness n

In addition to the civil penalties, however, there are

than five years, o~ both, together with the costs of prosec~­

If you have any questions or comments.concerning the

To SAN FRANCISCO (196A-SF-93255) (F) Dale 3/8/91

From s~L.- _ (SQ 5) b7C YI.. ?n IM>1 tJ 1.1 ~.,.l...c-,.oN"

The purpose of this memo is to document events that

Due to the fact that AUSA YAMAGUCHI was on annual leave

with regard to information supplied byl writer I

advised on more than one occasion by the writer of the potential

Nonetheless, on February ~l, 1991,1 saw fit to I

I following his resignation from Hamilton

On March 6, 1991, i r head of corporate

writer that his office had

Security Department or un Micro Systems, facsimiled 16 pages of ~~

Micro Systems personnel that this document tends to corroborate

than five years, o~ both, together with the costs of prosec~