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Rhodes. Mr. Rhodes’s due diligence process, however, was
directed toward documenting the banks’ historical bases in the
SMHC receivables and stock and obtaining representations that the
banks did not write down the receivables or stock for accounting
or tax purposes or otherwise claim the tax attributes that the
Ackerman group sought to obtain. See Exhibit 183-P (document
entitled “Basis Chronology”). Mr. Rhodes conducted no due
diligence on the more germane issues of whether SMP received a
carryover basis in the SMHC receivables and stock, whether the
transaction had any substance for Federal tax purposes, whether
the assets underlying the SMHC receivables and stock had any
value, or whether the $79 million receivable represented bona
fide indebtedness.201
Petitioner also points to his reliance on the
representations that Generale Bank and CLIS made with respect to
their tax bases in the contributed SMHC receivables. In the
exchange and contribution agreement, CDR, Generale Bank, and CLIS
represented that they had received no payment of principal on the
SMHC receivables and had not written down their loans for
accounting or tax purposes. Like Mr. Rhodes’s due diligence
investigation, the banks’ representations do not extend to the
201 On May 12, 1997, Mr. Rhodes asked for and received a
confirmation from White & Case that neither CDR, Generale Bank,
nor CLIS derived any U.S. tax benefit from the contribution of
the SMHC receivables and stock or the subsequent disposition by
Generale Bank and CLIS of their preferred interests in SMP.
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