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at the end of each fiscal year. The borrower was also required
to maintain various reserve or escrow accounts (collectively
reserve accounts) so long as the loan obligation remained
unsatisfied. In the event the borrower failed to comply with the
terms of the loan agreement, the Government could declare the
entire amount of the loan obligation immediately due and payable,
and, enforce all other available remedies. The Government also
had an option to waive any provision of the loan agreement.
On January 1, 1978, James Fedewa, on behalf of Fedewa
Builders, Inc., executed a promissory note for $28,056.41 to BBJ
(1978 promissory note). The 1978 promissory note, bearing 8-
percent interest, did not state a due date.2 Fedewa Builders and
Fedewa Enterprises ceased business operations in 1987.
In 1979, Touche Ross & Co., BBJ’s certified public
accountants, conducted an audit of BBJ’s books and records. On
its books and records appeared an asset account of $109,540 for
notes receivable due from two related entities.3 Despite the
related party transaction, Touche Ross & Co. gave BBJ a “clean”
financial opinion. However, beginning in 1982 and through 1988,
BBJ failed to obtain “clean” financial opinions and received
2 We note that the photocopy of the 1978 promissory note
is illegible and testimony by petitioner’s sole witness, Michael
A. Comito, did not provide such information.
3 It is unclear which two related entities generated the
notes receivable referenced in the Touche Ross & Co. audit.
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