account with Legg Mason in the name of APECO Equine and were
invested in stocks and bonds. Only Mr. Kluener could authorize
transactions, such as sales and purchases, with respect to that
account.
APECO's other directors and officers, including its
president, were not informed that the horses were sold in APECO's
name or of the funds held in accounts in APECO Equine's name, and
Mr. Kluener and his advisers made every effort to ensure that
those others did not know of the manner in which the sales were
effected or of the accounts. The sales were not recorded in
APECO's monthly financial statements for its year ending June 30,
1990. The account in which the securities were held was
maintained with Legg Mason rather than Fifth Third to keep
APECO's personnel from learning of it. At a January 16, 1990,
meeting of APECO's board, Mr. Kluener stated that between
$1,500,000 and $2,500,000 would be required to bring APECO's new
product lines to market, but that there did not appear to be any
source of such an amount of capital available to the company.
Suggestions as to potential sources of capital were solicited
from the board. Mr. Kluener purposely did not reveal to the
board the existence of the funds held in APECO Equine's name.
During the time when the proceeds of the horse sales were held in
its name, none of those proceeds were paid by APECO Equine to
APECO.
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