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informed petitioner about Ratliff's note. In January 1989,
Nicholson surrendered ownership of his stock in Northwest to
petitioner.
On January 8, 1989, Nicholson and petitioner amended the
repurchase agreement. The amendment provided that petitioner
owned 100 percent of Northwest's stock, and that Nicholson would
regain the 49-percent interest in Northwest when Northwest repaid
petitioner's accounts receivables due from Northwest and repaid
the advances made to Northwest during 1988. On January 9, 1989,
petitioner agreed to advance Northwest $50,000, and Moore, acting
as vice president of Northwest, delivered a 1-year, interest-
bearing promissory note to petitioner in that amount. Northwest
repaid petitioner $50,000 on February 22, 1989, but no interest
was paid for the time the note was outstanding.
In April 1989, Tracy Golden (Golden), a partner from the
accounting firm of Axley & Rode, who had been working on the
Foretravel account since 1983, was performing routine interim
audit work on petitioner's financial statements when he became
concerned that the receivables from Northwest might affect his
ability to express a "clean" opinion on petitioner's financial
statements. Golden wanted to observe firsthand the situation at
Northwest. He discussed the matter with Weaver, and they decided
to inspect Northwest and assess the situation.
On May 23, 1989, petitioner settled a note given to
Fishfader by Northwest. Petitioner paid Chrysler First
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