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date, the bank and PEC agreed to a final maturity date sometime
in 1988.
From 1986 to 1989, there was a substantial decrease in oil
production from the wells that PEC had purchased. Additionally,
the posted crude oil prices dropped from $28 per barrel in July
1985 to $14.85 per barrel in July 1988. PEC reported gross sales
and net losses for tax purposes as follows:
Year Ending Gross Oil &
June 30 Gas Income Net Loss
1986 $1,649,035 $36,219
1987 557,892 653,955
1988 642,479 305,313
1989 177,763 85,719
Theft Loss
On November 11, 1985, petitioner and Cisneros suspected that
Wheeler had misappropriated about $100,000 of PEC's funds which
was supposed to be used to pay a commission. In addition,
petitioner believed that Wheeler cashed the blank checks
petitioner gave him, and he misappropriated these funds for his
personal use. Consequently, on November 12, 1985, petitioner
changed the locks to PEC's office and informed Wheeler that he
was not to enter the office.
In April 1986, petitioner and Cisneros met with
representatives from the Texas Rangers--the law enforcement
division for the State of Texas. Petitioner and Cisneros
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