- 5 -
questioned Mr. Aude about the financial affairs, Mr. Aude would
respond that it was his money, and therefore it was not her
concern.
Magnum Oil and Gas
In late 1979 or early 1980, Mr. Aude met with Mr. Saranni, a
sales representative, to discuss a potential investment in Magnum
Oil and Gas (Magnum), a limited partnership. Magnum was
organized to acquire and develop oil and gas properties. While
the record is unclear regarding this meeting, infra, we determine
at a minimum that this meeting was attended by Mr. Aude, Mr.
Saranni, petitioner, and Mr. Gruys, the Audes' certified public
accountant and attorney. After the meeting, Mr. Gruys discussed
the investment with Mr. Aude and petitioner. In this discussion,
Mr. Gruys did not tell the Audes that it was a sham investment,
nor did he advise the Audes of the audit risk. He recommended
that the Audes not purchase an interest in Magnum because it was
"an inappropriate investment."4
In July 1980, Mr. Aude purchased 2.3 units in Magnum for
$86,250.5 Only Mr. Aude executed the investment papers and he
alone made the required capital contribution payments. At a
later date, petitioner discovered that Mr. Aude invested in
4 To Mr. Gruys, an inappropriate investment meant that they
might lose their capital investment.
5 Mr. Aude paid the purchase price through installments:
$23,000 in July 1980; $23,000 in March 1981; $23,000 in March
1982; and $17,250 in March 1983.
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