- 17 -
asserts that the partnerships’ investments were subject to
significant risks that were not hedged against, and, therefore,
the partners were not fully protected against losses. While
acknowledging that “Brunswick absorbed the friction on the PPNs
and IBJ CDs when these instruments were distributed to
Brunswick”, petitioner contends that (1) Brunswick’s assumption
of these costs is not inconsistent with partnership status, and
(2) equal sharing of losses among the partners is not required
under applicable State law. (Saba and Otrabanda were formed
under New York law.) Saba I, slip op. at 26, 56.
Expenses
Although Saba and Otrabanda paid certain operating expenses,
Saba I, slip op. at 28-29, 58, 60-61, we agree with respondent
that the underlying circumstances beg the question whether
Brunswick actually incurred the expenses. The record shows that
ABN and Brunswick expected that Brunswick would pay the
partnerships’ operating expenses. The August 7, 1989, memorandum
by den Baas (quoted above) expressly stated that ABN would be
compensated for out-of-pocket expenses and legal fees. Likewise,
the Zelisko memorandum stated in pertinent part that “Legal fees
for BC [Brunswick Corp.] and operating expenses of the
Partnership which would be paid by BC, would run about $400,000 -
$500,000.” Saba I, slip op. at 17.
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