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tax return (Form 1040) for the calendar year 1987 with the Internal Revenue
Service Center at Atlanta, Georgia.
Petitioner was vice president of retail sales development for IBP from
October 1971 until July 1975. In July 1975 IBP terminated petitioner's
employment, and in October 1975 IBP and petitioner entered into a settlement
agreement resolving certain issues arising from the termination of
petitioner's employment. When petitioner left IBP he took with him numerous
documents (the Bagley documents), including IBP's weekly profit and loss
statements, IBP's monthly production and sales reports, confidential legal
memoranda, and memoranda outlining IBP's goals, marketing strategies, and
pricing formulas. In late 1976 and early 1977, petitioner met with various
individuals who were interested in the activities of IBP, including several
attorneys who were contemplating pursuing antitrust litigation against IBP.
Petitioner discussed IBP's activities with the attorneys and provided them
with access to the Bagley documents. On June 7, 1977, IBP filed a suit
against petitioner and others in the U.S. District Court for the Northern
District of Iowa seeking $4 million in damages and injunctive relief,
including recovery of the Bagley documents (the IBP suit). The suit was Civil
No. 77-4040 and was entitled Iowa Beef Processors, Inc. v. Amalgamated Meat
Cutters & Butcher Workmen of N. Am., et al. The claims asserted in the suit
against petitioner by IBP were breach of contract, breach of fiduciary duty,
causing and assisting in another's breach of fiduciary duty, and conspiracy.
In late 1977 the Subcommittee on General Small Business Problems of the
U.S. House of Representatives' Committee on Small Business (the subcommittee)
initiated an investigation into the meat packing industry. The subcommittee's
investigation focused in large part on the activities of IBP. In the course
of its investigation, the subcommittee subpoenaed the Bagley documents and
various witnesses, including petitioner, for oral testimony. Petitioner
testified before the subcommittee on July 23 and 24, 1979. Petitioner's
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