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rejected Celduc's offer and continued to seek other potential
purchasers.
Generally, from July 1992 forward, one of petitioner's board
members or corporate officers was onsite in Germany to supervise
G�nther’s management and keep petitioner informed of
developments. Despite petitioner’s supervision, G�nther
continued to report operating losses in FYE April 30, 1993 and
1994.
In March 1993, petitioner hired Elson Nowell as
gesch�ftsf�hrer. Upon becoming gesch�ftsf�hrer, Mr. Nowell
discovered that G�nther had inflated the value of its inventory
by cycling old inventory through its subsidiaries.17 This
discovery necessitated additional substantial writeoffs in
connection with the preparation of G�nther’s commercial report
for its FYE April 30, 1993.
On January 21, 1994, in order to make G�nther more appealing
to potential purchasers, petitioner arranged an additional waiver
of G�nther’s intercompany receivable. Flint assigned $2,429,665
of its intercompany receivable to Flint Electronics, which then
waived the receivable, subject to reinstatement. This second
waiver was identical in all practical aspects to the first
17Under accounting principles applicable to an electronics
firm such as G�nther, older inventory is written down to
progressively lower values to account for its obsolescence and
reduced market value. G�nther avoided this writedown by
transferring assets among the subsidiaries.
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