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John Boswell, Palm Beach, Fla., social figure and maker of barrels for the aging of bourbon and wine, ran a bogus tax-exempt religious organization from his home and used it to fund an extravagant lifestyle, according to a court-appointed investigator. The report found “substantial evidence” that Boswell used de facto control of Lebanon, Mo.-based Independent Stave Co. — the nation’s leading manufacturer of bourbon and wine barrels — to divert millions to himself and to damage the company and its minority shareholders. As a result, the 92-year-old company with customers in 19 countries including Chile, France and South Africa, has been forced to borrow “millions” in “increased and unnecessary” debt, has lost “significant” tax deductions and has seen its value significantly depressed, says the report authored by Walter Colbath Jr., former chief judge of Palm Beach Circuit Court. Two children of Boswell’s by a second marriage are minority shareholders. Their mother, the former Tiffany Boswell, filed a shareholders derivative lawsuit in Palm Beach Circuit Court on their behalf in November. It alleges that John Boswell’s actions were designed to freeze the children out of their shareholder rights, “no matter what the consequences” to the company. The marriage of John and Tiffany Boswell, who were prominent in philanthropy, society and local Republican Party politics — ended in divorce Aug. 5, in a separate Palm Beach case. To resolve the shareholder suit, Colbath recommends that a court-appointed receiver take control of Independent Stave, whose estimated gross annual revenues top $100 million, and stop the alleged abuses. It also recommends that John Boswell, who has declared himself insolvent but has not filed for bankruptcy, be ordered to repay the company more than $14 million. Jeffrey Fisher, the West Palm Beach attorney who represented Tiffany Boswell in her divorce, said the shareholder lawsuit emerged from information obtained in the divorce action. “We developed the structure of the corporate case before John Boswell even knew it,” Fisher boasted. “It was a thing of beauty.” Steven Katzman, a Boca Raton litigator who is co-counsel with Fisher in the shareholder suit, said the report will be “a cornerstone” of the plaintiffs’ case. Colbath, author of the report, was nominated by John Boswell’s attorneys and approved by the court as an independent investigator. Shareholders derivative lawsuits are those brought by a corporation’s shareholders, theoretically on behalf of the corporation, to protect and benefit all shareholders, against the corporation for improper management. Under Florida law, defendants have the right to ask that an independent investigator be appointed to recommend to the court whether or not the suit is, in fact, in the corporation’s best interests. Typically, the investigator’s report determines whether the case should be dismissed. One of John Boswell’s attorneys, West Palm Beach litigator Louis Mrachek, said he was “disappointed with [the report's] form and content.” He said it included “numerous misstatements of fact” and “pure speculation.” Mrachek vowed to “litigate and win at trial.” John Boswell’s first marriage, to Ramona Boswell, who died in a 1978 car accident, produced three children — Amie, Bradley and Joe, now 34, 32 and 26, respectively. In 1982, at age 36, John Boswell married for a second time — to Tiffany Boswell, then 19. The second marriage produced two children — Johnathan, now 21, and Julie, 19. In their time together, John and Tiffany Boswell were at the center of Palm Beach’s social scene and the object of fawning press attention. A November 1997 profile in the Palm Beach Post described Tiffany as “svelte” and “sexy,” a “real-life Cinderella” who was rescued from drug addiction and poverty by the older, “Prince Charming” John Boswell. The couple was famous for fund-raising, including a personal gift in 1998 of $1.5 million to the Palm Beach Zoo. They also gave to the Baptist school Palm Beach Atlantic University and to National Right to Life. The couple’s 2001 political contributions included $4,000 to congressmen Mark Foley, R-Palm Beach Gardens, and $1,000 to E. Clay Shaw Jr., R-Fort Lauderdale. In 1995-1996, the Boswells gave $6,000 to GOP campaign committees. Independent Stave has been owned and operated by the Boswell family since its founding in 1912. It is now a wholly-owned subsidiary of the family’s ISCO Holding Co. Inc. in Missouri. At the time of ISCO’s creation in 1986, John Boswell was its majority shareholder. Other shares were placed in trust for the five children, including a roughly one-third interest for Tiffany’s children. Tiffany Boswell filed for divorce from John in October 2001. Two years later, acting on information developed in those proceedings, her attorneys wrote Boswell demanding that ISCO remedy alleged breaches of fiduciary duty by the company’s directors — John, Bradley and Amie Boswell. The letter asked that John Boswell immediately repay ISCO loans and advances of $10.2 million, that the company reduce Boswell’s salary, make no further loans or advances to John or to Boswell House Ministries, account for ISCO’s alleged $38 million cash on hand, and appoint an independent party to take temporary control of the company. On Nov. 5, 2003, Tiffany, acting as trustee of two of her children’s trusts, sued John, Bradley, Amie and ISCO for alleged breach of fiduciary duty and conspiracy. The suit claims that John, Bradley and Amie were using ISCO as “a personal piggy bank” and as “a tool” to punish Tiffany and her children because of the family’s internal conflicts. Also that November, Boswell sold his controlling interest in the company to the three children by his first marriage. According to Colbath, the children paid less than $30,000 for the shares. Experts consulted by Colbath estimated the company’s total value at as much as $150 million. On Jan. 7, John Boswell’s attorneys, Mrachek; Roy Fitzgerald and Julie Sellers, of West Palm Beach firm Page Mrachek Fitzgerald & Rose, asked Circuit Judge Thomas Barkdull to stay the shareholders derivative suit and appoint Colbath to investigate. After his appointment in February, Colbath compiled extensive documentation and interviewed all key parties in the case — though not under oath — as well as expert witnesses. His conclusions came as a shock to John Boswell’s attorneys. “It’s only a recommendation,” Mrachek said. But the attorney said it was “highly unusual” for an independent investigator’s report to contain highlighted typefaces and harsh language. In summary, Colbath’s report constitutes a playbook for the Boswell plaintiffs, even suggesting legal strategies for other potential plaintiffs. Colbath found that Boswell House Ministries, a Florida nonprofit created by John Boswell in 2002, operated out of the millionaire’s 13,383-square-foot Frenchman’s Creek mansion in Palm Beach Gardens but did little more than pay for Boswell’s “significant household and personal expenses,” including a four-person staff and masseuse. The former judge reported that the tax-exempt group received more than $600,000 in cash from Boswell’s family-owned corporation in 2003 but disbursed only $45,057.75 in seven charitable contributions — “many” of which “appear suspect.” Colbath also said he found $11.6 million in loans and advances from Independent Stave and “unreasonable” and “excessive” compensation of more than $8.5 million through 2003. The report describes the loans and advances as “merely a mechanism to allow John [Boswell] to avoid federal income taxes.” “The IRS shared this view,” Colbath wrote, “when it characterized portions of these amounts as constructive dividends” in several audits. Colbath found that ISCO never investigated Boswell’s ability to repay the loans and advances, and he questioned Boswell’s ability to do so, citing Boswell’s sworn financial disclosure in the divorce proceeding that his net worth was negative $8 million in 2001 and negative $10 million in 2003. In a section of the report titled “Where Did the Money Go?” Colbath wrote that “a substantial amount” of the money Boswell received from ISCO “remains unaccounted for.” The judge noted that Boswell has given varying accounts of his worth, “according to what is most advantageous to him.” Boswell submitted affidavits indicating offshore accounts containing approximately $500,000. But Colbath wrote that he “suspects that John [Boswell] has substantial cash reserves somewhere that could be used to satisfy a potential judgment.” In a section of the report titled “John and Brad are Not Indispensable to ISCO,” Colbath advises the company’s primary bank, Kansas City, Mo.-based Commerce Bank, “to support a lawsuit seeking to recover millions wrongfully taken from Independent Stave by John and Brad.” The full legal impact of Colbath’s report is yet to be seen. On May 4, Barkdull granted a defense motion to dismiss Bradley and Amie Boswell from the Palm Beach Circuit lawsuit. Barkdull cited jurisdictional reasons arising in part from Bradley’s residence in Missouri and Amie’s in California. Also, he wrote, “the preponderance of the evidence” shows that “no breaches of fiduciary duty occurred.” But Barkdull noted that his order followed an evidentiary hearing in which “none of the plaintiffs were present or testified.” Those dismissals are under appeal. And Colbath argued in his report that Barkdull’s order does not preclude lawsuits against Bradley and Amie in other jurisdictions. Both sides in the case said that the report made it highly unlikely that Barkdull would grant motions to dismiss filed by the remaining defendants, John Boswell and ISCO. The opposing attorneys disagreed on the report’s admissibility. But they agreed that its findings would make their way into the proceedings. Katzman said that “in the past” he has successfully argued to introduce independent investigators’ reports as evidence. “When we did,” he said, “we never had to try a case to a verdict.” Mrachek said the report “absolutely cannot” be introduced as evidence. He said Colbath could testify but would be limited by hearsay rules. An attorney experienced in securities litigation and not involved in the case, William Nortman, a shareholder at Akerman Senterfitt in Fort Lauderdale, said that the Colbath report may be introduced since it is public record. Nortman cautioned that “no matter how bad a particular document may be, there’s always another side.” But after listening to a brief example of the Colbath report’s toughest language, he said of the defense, “It sounds to me like they’ll settle the case.”

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