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During relevant periods, Mr. Groth was president and
secretary of Winery, and Mrs. Groth was vice president and chief
financial officer of Winery. The Groths had overall
responsibility for all Winery operations. Mr. Groth represents
to customers that he controls the production process from the
growing of the grape until the cork is put in the bottle. During
1985, the Groths had taken over full-time management of Winery;
prior to that time, Mr. Groth had been, successively, a partner
of the accounting firm of Arthur Young and Company, the chief
financial officer of Atari, Inc., and president of Atari's
international division.
Winery was initially financed by the Groths' personal
resources. By the end of 1983, their investment in Winery's
stock was $900,000, and their loans to Winery totaled $365,390.
Since it was established in 1982, Winery sought to build a
physical plant in which to make, store, and bottle its wines.
During 1982, Winery undertook to construct a winery plant,
investing $220,000, but the project was deferred when financing
could not be obtained. During 1982, Winery contracted with
another winery to crush and ferment its grapes pursuant to a
custom crush contract. During 1983, Winery constructed an open
pad in the Oakcross Vineyard for crushing and fermenting grapes,
investing $375,000. Winery also relied on the facilities of
other wineries during that year for the custom crushing of grapes
and the bottling, aging, and storing of its wines.
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