Opinion ID: 3008141
Heading Depth: 3
Heading Rank: 2

Heading: The Joint Venture’s Conduct

Text: On September 20, 2000, the same day the NTC Joint Venture was created, WCI, WB Partners, Barone’s and Watkins’s holding corporations, and the NTC Joint Venture executed a general indemnity agreement with the American International Group of Companies (“AIG”). The same entities entered a second indemnity agreement with Greenwich Insurance Company on January 2, 2002. Pursuant to the agreements, the NTC Joint Venture and all the entities that constituted it agreed to indemnify AIG and Greenwich against any costs incurred in executing a bond. The Insurance Company of the State of Pennsylvania issued a performance bond on October 18, 2000, and replaced it soon after with a superseding bond. The bond named WCI as principal, the insurance company as surety, and both McMillin and Harper as obligees. The face amount was $17,001,073, the value of WCI’s lump-sum subcontract with Harper. The NTC Joint Venture obtained an employer identification number and its own bank account. The joint venture also tracked its own financing and prepared its own progress reports. As the joint venture agreement contemplated, WCI received payment from Harper directly. DJB HOLDING CORP. V. CIR 13 Notwithstanding the terms of the agreement, the joint venture’s accountant opted not to file a tax return for the venture. Instead, the accountant believed that separately reporting WCI’s and WB Partners’ income from the NTC project was sufficient. As of September 30, 2002, WCI had billed Harper for $14,100,332, and incurred costs (plus five percent) of $5,822,738. This yielded a profit of $8,277,599, of which WB Partners was entitled to a seventy-percent share, or $5,794,319. In reality, a WCI invoice reflects that WCI paid WB Partners only $4,172,000, and kept for itself the remaining $1,622,319. As a result, WB Partners received only 50.4% of the profits, not 70%. Barone testified that the extra $1.6 million was a “bonus” to WCI in recognition of “a job well done.”