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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