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petitioner used to lease a Cadillac, M&L made monthly payments of
$6,000 to petitioner. Petitioner routinely reinvested portions
of these funds, and he borrowed funds from banks to make
additional investments in M&L. During his tenure with M&L,
petitioner made numerous solicitations to potential investors
(i.e., associates, friends, and relatives). These solicitations
resulted in over $1 million of investments in M&L. In return for
these investments, brokers, investors, and M&L paid petitioner
finder's fees of varying amounts.
In October of 1990, M&L filed a bankruptcy petition with the
U.S. Bankruptcy Court for the District of Colorado. On December
18, 1990, the bankruptcy court removed M&L as debtor in
possession and appointed a trustee. The trustee began a 3-month
investigation of M&L's financial activities that revealed M&L (1)
was operating ponzi and check-kiting schemes and (2) had no
inventory from which creditors' claims could be satisfied. On
July 17, 1991, petitioner filed a bankruptcy petition with the
U.S. Bankruptcy Court for the District of Colorado.
To recover funds for M&L creditors, the trustee commenced
adversarial proceedings against M&L investors and officers and
alleged that these investors and officers had received
preferential transfers or fraudulent conveyances. In August of
1991, the bankruptcy court assigned the accounting firm of
Patten, MacPhee & Associates, Inc. (the firm) to assist the
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