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E. Petitioner's Loans from Trust Co.
1. Loans to Petitioner
In 1990, petitioner borrowed $15,000 from Trust Co. Bank of
Northeast Georgia (Trust Co.) to increase the inventory in a
convenience store that he owned.
Activewear began to have cash-flow problems around April
1991, in part because Jackson and his corporations had not repaid
the loans to Activewear. Petitioner asked Trust Co. to lend
money to petitioner for Activewear to use as operating capital.
Trust Co. agreed to lend $50,000 to petitioner in April 1991 and
$15,000 in July 1991. Thus, at that time, petitioner had loans
totaling $80,000 from Trust Co. The $50,000 and $15,000 loans
were the personal liability of petitioner. Petitioner
immediately transferred the proceeds of these loans to
Activewear. Petitioner recorded these amounts on Activewear's
books as loan repayments by Jackson.
2. Collateral for Loans
In October 1991, when the $50,000 and $15,000 April and July
1991 loans were due, Tom Wilson, vice president of Trust Co.,
asked petitioner to consolidate them with his earlier $15,000
loan, and to provide collateral for the $80,000 consolidated
loan. Petitioner gave Trust Co. collateral consisting of his own
stock, mutual funds, and other marketable securities with a
market value of $27,291 and an $80,000 second mortgage to his
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