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the recyclers’ actual value was a potential issue. However, from
his experience prior to 1982 it was Schluter’s view that an audit
was unlikely and that even if the IRS questioned the recyclers’
value, the IRS would merely adjust the recyclers’ value and
reduce an investor’s deductions and credits.
Subsequently, Schluter requested that Ernest Mejia, a
licensed financial broker, review the Hamilton transaction. In
1979 or 1980, Schluter had become acquainted with Mejia, who sold
life insurance to and instituted an employee stock ownership plan
for a company owned by Woolf. Schluter also had prepared Mejia’s
tax return for 1 year.
In addition to reviewing the financial projections in the
offering memorandum, Mejia visited PI’s business location to
observe the operation of a recycler. Based upon his observation,
Mejia reported to Schluter that the recyclers appeared to operate
satisfactorily. However, Mejia’s involvement with Hamilton was
not limited to reviewing the transaction. Mejia also acted as a
broker on the transaction.
Schluter also learned of a C.P.A. in Oklahoma who was
familiar with the plastic recycler transactions. Schluter was
told that the Oklahoma C.P.A. was “so sold on the program he
became a general partner.” Schluter and the Oklahoma C.P.A.
discussed the recyclers’ value and agreed that they had
reservations regarding the value of the recyclers. However,
Schluter and the Oklahoma C.P.A. conjectured that based upon the
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