- 9 -
were $3.3 million and $700,000, respectively. In order to have
funds available to pay these liabilities, and to ensure
performance of certain noncompetition agreements, the decedent
and Ms. Trompeter agreed to place their Sterling preferred stock
and certain Government bonds into an escrow account. On
March 17, 1989, the decedent and Ms. Trompeter transferred a
total of $4 million into an escrow account at City National Bank
(CNB). Eleven days later, they transferred their Sterling
preferred stock into the account. The decedent's cash of
$1,986,607 and his Sterling preferred stock were kept in a
subaccount that CNB maintained solely for his benefit, and
Ms. Trompeter's cash of $2,013,393 and her Sterling preferred
stock were kept in a separate subaccount at CNB that was
maintained for her. The escrow agent was required to pay any
claim that was submitted to the agent upon settlement of the
aforementioned liabilities. Ms. Trompeter could withdraw certain
amounts of the cash from her subaccount before the agent paid the
liabilities, as could the decedent with respect to the cash in
his subaccount.
In early 1993, settlement was reached regarding TEI's
liability to CFTB. On April 5, 1993, Ms. Gonzalez, on behalf of
the Trust, and Ms. Trompeter directed CNB to disburse funds from
the respective subaccounts to pay CFTB the amount of the
settlement. Ten days later, CNB paid $3,077,100 out of the
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