“Due to OIN’s status as a controlled foreign corporation and OSG’s status as a “United States shareholder” of OIN, under the U.S. tax code, certain actions by OIN (including

guaranteeing or providing security for OSG’s outstanding debt) will trigger immediate

taxable income for OSG with respect to some of all of the $2.2 billion in earnings that

have not yet been subject to U.S. federal income taxation. This is true even without an

actual distribution of cash by OIN to OSG.... If OIN were to lend $100 million to OSG, $100 million of OIN’s currently untaxed earnings ($2.2 billion) would be accelerated and would produce taxable income for the U.S. .. If OIN guarantees OSG’s obligations on the $900 million Forward Start Agreement, it would create $900 million of taxable income and approximately $300 million of cash taxes for OSG... The assets of a controlled foreign corporation serve at any time, even though indirectly, as security for the performance of an obligation of its U.S. shareholder. The controlled foreign corporation will be considered a pledgor or guarantor of that obligation. Income tax inclusion would equal the amount of the obligation and not the value of CFC’s pledged assets.” 

The situation, according to the SEC, eventually became unsustainable, and the CFO was forced to recommend to the board that the company file for bankruptcy protection. The board, in turn, was very surprised at this news, as no one had told them about it. The CFO, in turn, said they felt it didn't need to be disclosed. The matter was also not disclosed to the company's outside auditor for the same reason. The board then went on to disclose the tax liability, using the resignation of a member to do so, as a resignation must be immediately reported through a Form 8-K.