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permitted by the discretionary authorization to retain a portion
of the enhanced return as its income.
d. Pace Investments
LTD offered Pace investments (including one called Pace II)
to clients who had unused lines of credit with Mexican financial
institutions. Generally, such institutions would have
insufficient liquidity to allow clients to draw any further funds
on their lines of credit. LTD offered to its clients (who were
not necessarily the ones with unused lines of credit with Mexican
financial institutions) a stated rate of return on funds invested
for a fixed period of time. LTD deposited such funds with banks
in Mexico for a period of time coinciding with the maturity date
agreed upon with LTD's clients. LTD earned interest on the
deposited funds. The deposit was made with the stipulation that
the money be used to allow LTD’s client in Mexico to draw on its
formerly unused line of credit.
The client, now able to draw upon its line of credit, paid
LTD a fee to complete the transaction. LTD derived income on the
difference between (1) the sum of the interest earned from the
Mexican bank and the fee earned from the client and (2) the
interest paid to its clients as their stated rate of return for
making a deposit with LTD.
e. MMA II
MMA II was a "back-to-back" operation designed to take
advantage of a loophole in the Mexican tax law that lasted
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