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self-serving and unconvincing. There was no appraisal of UPE’s
inventory. The witnesses estimated the value on the basis, in
great part, of a one-time brokered sale of two turbines for
$14,500,000 in which UPE received a $450,000 fee. Petitioner has
not shown that its inventory was similar to the example used by
the witnesses. There is little in the record to show exactly the
type of equipment in UPE’s inventory and/or that the equipment
was in good working order.
Significantly, UPE’s inventory was sold locally, only a few
years later, for scrap. Grocers made one loan directly to UPE
with its equipment as security. All other loans from Grocers
went through petitioner. It is likely that Grocers would not
lend more directly to UPE because of UPE’s lack of capital for
security. The value of UPE’s inventory was, therefore,
insufficient to provide security for a loan or improve UPE’s
financial picture at the time of the advances. Accordingly, even
if the inventory had been pledged by UPE as security for
petitioner’s advances, it would have been insufficient to provide
the security that a creditor would require.
Without petitioner’s advances, UPE would have been unable to
continue the salvage operations, purchase equipment, or perform
under the Formosa contracts. UPE reported a loss during every
year of its existence. Even after it began receiving progress
payments from Formosa, UPE needed large infusions of capital
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Last modified: May 25, 2011