-9-
expressly denied fault and liability; (b) the agreement was a
release and settlement of disputed claims; (c) the payment was
provided solely to buy peaceful continued business operations for
petitioner and to avoid further litigation; and (d) nothing in
the agreement was a release of any claim against the defendants
under the Internal Revenue Code; (4) the Government agreed not to
criminally prosecute the defendants, to refrain from any further
investigation of the claims raised in the lawsuit, and to release
claims for suspension or debarment by the Agriculture Department
against the defendants and OMCC; and (5) Bob, Byron, Ann, and
Cook Farms stipulated that they had no interest in petitioner’s
property or assets or in OMCC.
G. Payment of the Settlement and Legal and Professional Fees
On December 23, 1997, petitioner and Mildred, as general
partners of OMCC with a 99.5- and a .5-percent interest,
respectively, each signed and submitted to The Commercial Bank
(the bank) written authorization for OMCC to borrow up to $1
million. On December 23, 1997, petitioner and OMCC, identified
in the loan documents as coborrowers, borrowed $550,000 from the
bank. As security for this loan, petitioner, as grantor,
transferred to the bank a deed of trust on her residence. In
addition to the loan described above, OMCC borrowed $75,000 from
the bank pursuant to a line of credit. Late in December 1997,
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