- 103 -
for fees to enlarge and maintain EPIC's real estate
empire." As an essential element of the "scheme",
respondent alleges that "EPIC secured inflated, faulty
appraisals to support the nonrecourse debt originated by
EMI to acquire the 106 properties." In this connection,
respondent asserts that EPIC, through CAG "encouraged
outside appraisers to inflate values on properties acquired
by the partnerships", such as "by requesting appraisers to
value multiple properties purchased in bulk sales as if
purchased separately by different individuals." As a
result, respondent argues, the nonrecourse debt issued by
EA 83-XII and EA 84-III to acquire the properties exceeded
the value of the properties. Thus, respondent asserts:
"there was no incentive to repay the debt and the debt
lacked economic substance."
Respondent also argues that the instant transactions
did not "involve unrelated parties and independent
appraisers establishing purchase prices." Respondent
argues that the transactions "involved related parties"
and notes that EPIC, acting through its subsidiary, EMI,
"originated, serviced each nonrecourse loan, and was
primarily responsible for any due diligence related to
the loans." Respondent claims that for at least six
properties acquired by EA 84-XII, EPIC, through two
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