Estate of Robert G. Kluener, Deceased, Donald E. Hathaway, Co-executor and Charlotte J. Kluener - Page 23

            in the name of APECO Equine.  Petitioners attempt to explain this                             
            by claiming that their use was unnecessary because APECO was                                  
            breaking even with respect to its cash-flow for the year ending                               
            June 30, 1990.  Petitioners' explanation, however, does not                                   
            account for the fact that during that year, APECO received a loan                             
            of $1,500,000 from Fifth Third, and Mr. Kluener advanced                                      
            substantial amounts to APECO to finance its operations using                                  
            funds from his agency account.  Moreover, APECO's financial                                   
            condition during that year was tenuous.  Its audited financial                                
            statement for its year ending June 30, 1990, stated that APECO                                
            might not be able to continue as a going concern in view of its                               
            losses, and APECO's balance sheet as of that date reflected                                   
            negative shareholder's equity of $2,308,869.                                                  
                  Additionally, the secrecy surrounding APECO's involvement in                            
            the sale of the horses casts doubt upon whether the horses were                               
            transferred to APECO for a legitimate business purpose.  The                                  
            titling of the horses in the name of APECO, their sale in its                                 
            name, and the receipt and possession of the sales proceeds were                               
            not reflected in APECO's financial records until APECO's audited                              
            financial statements for its year ending June 30, 1990, were                                  
            prepared, which occurred after the proceeds had been distributed                              
            to Mr. Kluener.  Mr. Stock, APECO's president, was unaware of                                 
            APECO Equine's existence, and Mr. Kluener made every effort to                                
            ensure that APECO's other personnel did not learn of APECO's                                  
            involvement in the sale of the horses or of the funds held in                                 
            APECO Equine's name.                                                                          

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