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a .05-percent individual general partner; and Mithril Corp.--a
.9-percent corporate general partner. In exchange for the leased
equipment, CFP issued its $15.05 million recourse promissory note
bearing 8 percent interest, payable within 60 days to ERA. The
$15.05 million CFP promissory note was executed on behalf of
CMACM (as CFP’s general partner) by Gregory W. Johnson (Johnson),
a vice president of petitioner. After the respective sales to
ERA and CFP in steps 1 and 2, the leased equipment remained
subject to the debt incurred by CLI to purchase the equipment,
and liens that CLI had placed on the equipment and rents due
under the existing end-user leases. In addition, following ERA’s
sale of the equipment to CFP, ERA placed liens on the equipment
to secure payment of CFP’s $15.05 million note to ERA.
3. Also on November 1, 1994, CFP sold the leased equipment
for $14,872,910 to EQ Corp. (EQ), subject to the existing end-
user leases to K-Mart, Shared, and others. ERA consented to the
sale of the leased equipment from CFP to EQ. Joel Mallin
(Mallin), a lawyer in New York, held a major and/or controlling
interest in EQ and its vice president was Joel Klein (Klein), who
rented office space from Mallin. EQ paid for the leased
equipment by issuing to CFP a “$14.125 million Secured Limited
Recourse Installment Note” and a “$747,910 Secured Recourse
Promissory Note”, both of which had a 12-percent interest rate.
The $14.125 million installment note was payable:
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