- 64 -
deceived him. In his letter, Mr. Thompson said that he had gone
to Mr. Kersting to reduce his tax liabilities but that he now
believed the cost to him would be great because the Internal
Revenue Service was challenging Mr. Kersting's programs.
Mr. Thompson suggested that the biggest worry for Kersting
program participants was Mr. Kersting's "ultimate weapon", the
promissory notes. Mr. Thompson enclosed a copy of a letter that
he had received from Mr. Kersting as an example of what the
others might face.33 Mr. Thompson informed the other
participants that, although Mr. Kersting had promised to cancel
all promissory notes in exchange for the surrender of the
Kersting company stock that was purchased with the proceeds of
the primary loan, Mr. Thompson had tried to surrender his
Kersting company stock but Mr. Kersting had refused to cancel
Mr. Thompson's promissory notes. Mr. Thompson indicated that
he no longer trusted Mr. Kersting, and that he had retained
Mr. DeCastro.
By letter dated May 5, 1987, Mr. Yamada advised Mr. Thompson
that a lawsuit against Mr. Kersting would have merit, and that a
class action lawsuit should be considered. Around this time,
Mr. DeCastro had proposed to file suit on behalf of the Thompsons
against Mr. Kersting in Federal District Court.
33 Although the Court's copy of Mr. Thompson's Apr. 10,
1987, letter does not include a copy of a letter from
Mr. Kersting, we assume that Mr. Thompson circulated
Mr. Kersting's letter of Aug. 23, 1986.
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