-4-
June 24 and 25, 1993, petitioner sold all of those shares at a
loss of $2,816,540. Petitioner claimed this loss as a capital
loss for 1993. Four years later, petitioner reported on his 1997
Federal income tax return that he had at the beginning of 1997 a
capital loss carryover of $460,486. The record does not specify
the source of that carryover.
C. Administrative Proceedings by the SEC
During 1996, the Securities and Exchange Commission (SEC)
instituted administrative proceedings against Weissman, Martin,
Baron, and Bressman (collectively, the brokers) in connection
with their sale of HPI stock. The SEC found that the brokers
manipulated the market for HPI stock from October 1991 through
June 1993 and effectively controlled the market for HPI stock.
See SEC Release No. 42103 (Nov. 4, 1999); SEC Release No. 37831
(Oct. 17, 1996); SEC Release No. 37661 (Sept. 9, 1996); SEC
Litigation Release No. 14987 (July 23, 1996).
D. Indictment
On May 13, 1997, the District Attorney for the County of New
York, New York, announced the criminal indictment of Baron,
Bressman, and 12 other members of Baron. Among other things, the
174-count indictment charged the defendants with violating the
New York Enterprise Corruption Statute, NY Penal Law, sec. 460.20
(Consol. 1993). In the fall of 1997, Baron pleaded guilty to the
charges filed against it. On December 15, 1997, Bressman pleaded
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