Oreland A. and Lucille S. Thornsjo - Page 11




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          the recyclers’ actual value was a potential issue.  However, from           
          his experience prior to 1982 it was Schluter’s view that an audit           
          was unlikely and that even if the IRS questioned the recyclers’             
          value, the IRS would merely adjust the recyclers’ value and                 
          reduce an investor’s deductions and credits.                                
               Subsequently, Schluter requested that Ernest Mejia, a                  
          licensed financial broker, review the Hamilton transaction.  In             
          1979 or 1980, Schluter had become acquainted with Mejia, who sold           
          life insurance to and instituted an employee stock ownership plan           
          for a company owned by Woolf.  Schluter also had prepared Mejia’s           
          tax return for 1 year.                                                      
               In addition to reviewing the financial projections in the              
          offering memorandum, Mejia visited PI’s business location to                
          observe the operation of a recycler.  Based upon his observation,           
          Mejia reported to Schluter that the recyclers appeared to operate           
          satisfactorily.  However, Mejia’s involvement with Hamilton was             
          not limited to reviewing the transaction.  Mejia also acted as a            
          broker on the transaction.                                                  
               Schluter also learned of a C.P.A. in Oklahoma who was                  
          familiar with the plastic recycler transactions.  Schluter was              
          told that the Oklahoma C.P.A. was “so sold on the program he                
          became a general partner.”  Schluter and the Oklahoma C.P.A.                
          discussed the recyclers’ value and agreed that they had                     
          reservations regarding the value of the recyclers.  However,                
          Schluter and the Oklahoma C.P.A. conjectured that based upon the            




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