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Mr. Whelpley was a director and key employee of both WAI
and CPI, and although the two companies shared office
space, CPI was separately incorporated, maintained a
separate bank account, and established a distinct and
independent board of directors. Moreover, Mr. Whelpley
acknowledged during his testimony at trial that CPI was a
"functioning entity". Thus, we find that CPI was not a
"division" of WAI and we reject petitioners' argument
that Weeden's intent to make an equity investment in CPI
somehow how constituted an equity investment in WAI. In
this connection, we note that in their post-trial briefs,
petitioners abandoned the argument advanced at trial that
CPI was "a wholly owned subsidiary of Wai."
We note that Mr. Flaherty's letter of September 18,
1991, states as follows:
The amounts that were advanced, as loans,
to Whelpley Associates, Inc. and yourself
[Mr. Whelpley] were to be recovered either;
(1) in the form of loan repayments, or (2)
convertible into equity in the projects that
CPI and WAI were pursuing. Weeden considers
amounts advanced to be returnable as equity
in any business entity that results from the
activity funded in 1987.
During his testimony, Mr. Flaherty stated that he did not
recall writing the letter of September 18, 1991, but he
reiterated the fact that Weeden intended to advance money
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