14
The actual tender offer, which was excluded from the
partnership agreement, was not the origin of the claim. Rather,
the origin of the claim was the alleged misappropriation of
inside information, followed by improper trading.
Peters received $7,500 from Lounsbury and $43,000 from Mick
on November 19 and 20, 1985, respectively. The SEC alleged in
its suit brought against Peters that although these payments were
debt repayment, they were only made as a result of Peters' having
illicitly obtained inside information concerning the pending
tender offer for stock of ERG, which he then relayed to Mick and
Lounsbury, who profited therefrom by trading in ERG stock. The
underlying transaction, or set of facts that gave rise to the
claim, is not the actual debt repayment, but rather the facts
giving rise to the claim are that the debt repayment was in
actuality the profits of insider trading. The claim is the SEC's
allegations. PGWV was not named as a defendant in the SEC's
suit. If the gain had been realized by or for the benefit of
PGWV, then the activity, although illicit, would have been within
the company's trade or business. For instance, if a bank
executive is charged with embezzlement, that conduct would be
within his own profit-seeking activities, not that of the bank,
but if the bank executive were found guilty of causing improper
foreclosures, and such foreclosures benefited the bank, that
activity, although improper, would be in the trade or business of
the bank.
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