Paul Garfinkle - Page 4

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               In fact and contrary to the above representations in the OM,           
          the S-J partnerships obtained coal mining leases on only 400                
          acres of property.  Significantly, with regard to the remaining             
          10,600 acres, mining leases were not available because in 1976,             
          at the time the S-J partnerships were promoted and sold, a                  
          Federal moratorium was in place on the issuance of mining leases            
          for coal reserves owned by the Federal Government.                          
               Attached to the OM was a feasibility study in which                    
          estimates of probable coal reserves on the property were made and           
          in which it was again suggested that leases to mine the coal                
          reserves on the property could be readily obtained.                         
               In the feasibility study, additional misrepresentations were           
          made with regard to the market price of coal, the estimated                 
          amount of coal reserves on the property, and the sulphur content            
          of coal reserves on the property.  The author of the feasibility            
          study was not a geologist, as represented in the OM, and he had             
          no special qualifications to prepare the feasibility study.                 
               In the OM, it was represented that advanced royalties that             
          the S-J partnerships agreed to pay were negotiated at arm's                 
          length between unrelated parties and that such advanced royalties           
          would give rise to large net operating losses for the S-J                   
          partnerships and its limited partners.                                      
               Stated advanced royalty obligations of the S-J partnerships            
          under the lease agreement were in fact not negotiated at arm's              





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