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Like the $535,000 fee that made its way into Merrill Lynch’s
valuation of Saba’s LIBOR notes, we find it incredible that
Brunswick was unaware that Merrill Lynch added the private
placement discounts to the value of the LIBOR notes. Just as
before, we charge Brunswick with knowledge of Merrill Lynch’s
valuation methodology inasmuch as Merrill Lynch’s valuation
letters were provided to Saba and Otrabanda and were relied upon
by Brunswick to determine the price that it would pay for 50
percent of Sodbury’s and Bartolo’s partnership interests. Saba
I, slip op. at 38-40, 67-68.
We also reject petitioner’s assertion in its reply brief
that Brunswick’s absorption of the transaction costs relating to
the purchases and sales of the PPNs, CDs, and LIBOR notes “was
not the result of any agreement between ABN and Brunswick”. As
den Baas’ August 7, 1989, memorandum and the Zelisko memorandum
plainly show, ABN and Brunswick understood at the outset that the
LIBOR notes would be distributed to Brunswick as a required
element in its tax-avoidance plan. Consequently, it follows that
Brunswick and ABN must have agreed in advance that Brunswick
would absorb the partnerships’ expenses and losses and that a
large portion of those expenses and losses would be transferred
to Brunswick through the valuation of the LIBOR notes.
We are not persuaded by petitioner’s contention that ABN and
Brunswick would have shared in the partnerships’ potential losses
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