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DCV Holdings3/24/2005
At trial, Porta testified that he had told Halter everything he knew about the rebate. Halter contradicted this testimony, stating that neither Porta nor anyone else had ever told him that Leddy never intended to honor the rebate. Halter and Steksjal both testified that at the July 21 meeting both Hilling and Christensen said that DuCoa was justified in billing the rebate. In his deposition, Gundersen stated that the rebate letter appeared to him to have created a binding legal obligation.
On July 22, Halter and James had a conference call with Hilling, Christensen and Fischer. According to Halter, Fischer stated that based on Leddy's letter he believed that a rebate had been promised by Du Pont and was deserved by DuCoa. At Halter's request, Fischer put his thoughts into writing and forwarded his explanation as well as a copy of Leddy's letter to Halter on July 23. Fischer's memo provided as follows:
At the end of the year, the support amount was not agreed to by Du Pont and DuCoa. I asked Ray Hunting for a letter with the idea that we would complete negotiations for 1996 rebates during the first quarter of 1997. He referred me to John Leddy who provided the letter. Admittedly, I knew this letter required further negotiations between the parties. At this point, I had no idea that DuCoa would be for sale and I had full confidence that an additional rebate could be worked out until I met Ray in San Antonio during March of 1997.
I believed that the promised support was due DuCoa and discussed with Lindell [Hilling] the possibility of bringing the DuCoa board into negotiations.
ConAgra and DuCoa have been purchasing TMA from Du Pont since 1984. During this period of time, until 1996, Du Pont had given price support for TMA in the form of low prices, year-end rebates or credits.
I had no reason to believe that this support would not continue in some form. In retrospect, it was a mistake for me to assume that the support would continue.
On the other hand, I still feel that the support is owed to DuCoa based on previous discussions with Du Pont, past history, and market conditions.
At trial, Halter stated that after reading Fischer's memo he understood that there was no agreement at the end of December 1996 as to the amount of the TMA rebate. He also stated that he was aware that booking income from a rebate as to which there is no contract or obligation to pay is contrary to Generally Accepted Accounting practices (GAAP). When Halter was asked if he made further efforts to get to the bottom of the issues after July 23, he testified as follows:
At that time, no, because at that time I felt that all I had to do was to remit the money, have Sikorski know that I had remitted the money, and that issue would go away as a disclosure area, and I would sort out later with Joe Glas and people in specialty chemical as to whose books this would really go on.
Disclosure to Winward was of the essence, and Halter sent a fax to Sikorski on July 23, the same day he received Fischer's memo. The pertinent portions provided as follows:
The December 31, 1996 audited financial statements of DuCoa had a TMA rebate receivable from Du Pont in the amount of $506,198 (based on a December 17, 1996 letter from Du Pont.) This receivable was established at the rate of $0.035 per pound on total TMA purchases of 14,462,800 pounds by DuCoa in 1996. TMA is a major raw material for producing choline chloride. Historically, rebates and/or credits were provided to DuCoa based on Du Pont's approval. In March 1997, after further negotiations with Du Pont on TMA price, it was determined that Du Pont would not be remitting the
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