Lee D. Froehlich - Page 18

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          Petitioner and Mr. Greenspan believed that the case could be                
          settled if it could be established that there were two distinct             
          elements in petitioner's 1990 Federal income tax return--the                
          $400,000 capital contribution taken as a loss and the $400,000              
          bad-debt deduction.  Petitioner and Mr. Greenspan brought records           
          to substantiate this particular contention.  During this meeting,           
          the records were photocopied by respondent's counsel and his                
          assistant.  This, in addition to the obvious settlement                     
          discussion in the beginning of the meeting, caused petitioner to            
          believe that the entire session was for the purpose of                      
          settlement.                                                                 
               Respondent's counsel, who is sophisticated and experienced             
          in such matters, delineated between the initial settlement                  
          discussion and the beginning of the process of stipulating facts            
          for trial.  Petitioner and Mr. Greenspan, however, were not                 
          sophisticated and experienced in such matters.  It was only                 
          toward the end of the meeting, when respondent's pretrial counsel           
          advised petitioner to obtain counsel, that it could have become             
          clear to them that the subject matter had turned to preparation             
          for trial as opposed to settlement discussions.  In addition, the           
          subsequent telephonic discussions between petitioner and                    
          respondent's counsel concerned the question of duplicated                   
          $400,000 amounts and could have given petitioner the impression             
          that the possibility of settlement was still under discussion.              





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