5
In October 1986, the IMG partners received subpoenas from
the SEC that sought documents and testimony concerning the
transactions involving ERG stock made around the time of the
tender offer. The partners met with attorneys from various law
firms located in Wichita, Kansas, and Washington, D.C., to
determine how best to respond to the subpoenas, to determine what
the implications were as to the firm or the individual partners,
and to ascertain what steps needed to be taken. Initially none
of the partners knew that the investigation was specifically
targeting the conduct of Peters.
On December 23, 1986, an agreement was executed whereby Ivan
withdrew from the partnership. Pursuant to such agreement, Ivan
received the value of his capital contribution, as well as a
commitment for one-sixth of the annual net income of the
partnership or any successor to the partnership.
On December 11, 1986,3 IMG was dissolved and replaced by
Peters, Gamm & West, Inc. The corporation began conducting
business in January 1987. The corporation assumed all of the
partnership's assets, retained its clients, kept the same
employees and place of business, and assumed all partnership
obligations and liabilities. The business of IMG was
3 PGWV's 1988 income tax return shows that the date of
election as an S corporation was Dec. 11, 1986. This conflicts
with the withdrawal agreement executed by the Investment
Management Group on Dec. 23, 1986. The validity of the S
election is not in issue, nor is the validity of the partnership
withdrawal agreement.
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