We note that, at a January 16, 1990, board meeting, Mr.
Kluener estimated that between $1,500,000 and $2,500,000 would be
required to bring APECO's new product lines to market. He also
stated that there did not appear to be any place the corporation
could obtain such a quantity of capital, and he solicited
suggestions for sources of capital from the board. Mr. Kluener
made the foregoing statements even though he was aware that the
proceeds of the horse sales were being paid to APECO Equine. Mr.
Hathaway admitted at trial that, in making those statements, Mr.
Kluener was engaging in a "charade". Although petitioners claim
that Mr. Kluener did so in order to maintain the fiscal
discipline of APECO's personnel, Mr. Kluener's misrepresentation
to the board indicates to us that the proceeds of the horse sales
were not intended for use by APECO.
Petitioners contend that Mr. Kluener intended the secrecy to
keep APECO's personnel focused on the development of the
Planatronic because they would have attempted to use the money
for other projects had they known of it. Mr. Kluener, however,
was an experienced businessman, the sole shareholder of APECO,
its chief executive officer, and a director. According to Mr.
Stock, Mr. Kluener attended meetings of APECO personnel and
designated the products to be developed. Moreover, APECO's
personnel were working on a variety of projects, with Mr.
Kluener's apparent approval, during the time that the Planatronic
was being developed, and the minutes of meetings of APECO's board
during 1989 and 1990 do not indicate that the corporation's
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