Robert & Diane Schwartz - Page 5




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          boat.  Mr. Schwartz was advised by these sailing professionals              
          that purchasing a 50-foot boat would be a good investment.                  
          The Diane and Diane Racing                                                  
               On February 13, 1991, Mr. Schwartz purchased a 50-foot                 
          Nelson Marek racing sailboat (the Diane) from an unrelated third            
          party for $350,000.  At the time of purchase, the Diane had a               
          market value of $680,000.  Mr. Schwartz was able to purchase the            
          Diane for approximately half its value because repairs were                 
          needed to the hull.  Mr. Schwartz thought he could make a profit            
          from this venture because he bought the Diane at a “bargain”                
          price.  Before purchasing the Diane, petitioners received oral              
          financial projections from experts, including the then president            
          of the Association, Wictor Forss.                                           
               In order to purchase the Diane and the necessary sails and             
          equipment, petitioners received a mortgage on the Diane for                 
          $485,000.  Diane Racing’s attorney, Ira Stechel, advised                    
          petitioners that ownership of the Diane should be maintained                
          individually because the insurance policy would not allow Diane             
          Racing to have ownership and the mortgage contained an                      
          acceleration clause if ownership changed.                                   
               The Diane was designed as a racing sailboat and did not                
          include any personal amenities (e.g., toilet, kitchen, or                   
          sleeping quarters).  At the time they purchased the Diane,                  
          petitioners also owned two other boats (a 25-foot Black Fin and a           






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Last modified: May 25, 2011