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the loan. (Matthews & Wright repaid this loan later in 1986
using funds received from the sale of the Bonds to the investing
public.) The money from Security Pacific, less an amount paid to
redeem a relatively small amount of the Ironwood bonds,
ultimately went to the Heritage National Bank of Austin, Texas
(Heritage). Heritage deposited $17,778,146.53 of these funds
into the "developer loan fund" account of Whitewater, Ltd. Of
this amount, $1,425,000 was used to purchase land for the
Whitewater project.
Whitewater, Ltd., had agreed to provide credit enhancement
for the Whitewater bonds by obtaining a letter of credit. To
arrange for this letter of credit, Whitewater, Ltd., entered into
an agreement with MCFC No. 47 and gave MCFC No. 47 a
reimbursement note, secured by a First Deed of Trust on the
Whitewater project. On the same day, pursuant to a "deposit
agreement", Whitewater, Ltd., transferred the $17,778,146.53 from
its developer loan fund at Heritage to Unified's account at
Heritage. This transaction was made pursuant to an understanding
that Unified would disburse the Bond proceeds, as needed, for
construction. This deposit agreement was not revealed to the
Housing Authority or its counsel. Using the bond proceeds from
Whitewater's developer loan fund, Unified then purchased
Whitewater, Ltd.'s reimbursement note, secured by the First Deed
of Trust, from MCFC No. 47 for $16,110,817.98. MCFC No. 47 used
this $16,110,817.98 to purchase a "Settlement Annuity Contract"
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