3. Stephen Murphy owned Intertie, a California company that was involved in financing and managing cable television stations. Murphy was an officer of the corporation and chairman of the board of directors. Intertie would buy a cable television station, make a small down payment and finance the remainder of the price. It would then create a limited partnership and sell the cable station to the limited partnership receiving back cash and a promissory note. Intertie would then lease back the station from the partnership. Intertie purchased over 30 stations and created 30 limited partnerships from which it received over $7,500,000 from 420 investors. No limited partnerships had more than 14 limited partners; most of them were unaccredited investors. The sale of the limited partnerships was not registered with the SEC.

Evidence showed that none of the limited partnerships was self-supporting. Intertie comingled partnership funds, taking funds generated from the sale of new limited partnerships to pay the debts of other limited partnerships. Intertie did not keep any separate financial records for the limited partnerships, but rather consolidated all the transactions.

Intertie suffered severe financial difficulties. The limited partners claimed that these securities should have been registered with the SEC prior to sale. Should the sale of the securities qualify for a private placement exemption? (i.e. should this be treated as 30 different sales with fewer than 35 unaccredited investors each or as a single sale of 420 limited partnership interests?) Explain.