Opinion ID: 777182
Heading Depth: 2
Heading Rank: 3

Heading: The Audit and the Termination

Text: 8 In the second quarter of 1999, Riley nominated El-Khoury as a candidate for audit. An independent firm conducted the audit on April 22, 1999. The auditors discovered that the franchise had underreported and underpaid California state sales tax by approximately $15,000. In May of 1999, Chevron issued a Notice of Termination, informing El-Khoury of its intent to terminate the franchise. Chevron stated that El-Khoury had violated the general provision of the Dealer Agreements regarding a dealer's compliance with law. 3 To support its termination notice, Chevron attached the independent audit report. 9 At first, El-Khoury denied that he had knowingly underreported sales tax. Later, he admitted that he had underreported and underpaid because of financial difficulties. El-Khoury stated that he always had intended to file amended returns to correct the violation. In March of 2000, he did so. He has paid the deficiency, including interest and penalties, and is now in good standing with the state.