Gerry M. Griggs - Page 10

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          was payable together with interest no later than June 17, 1996.             
          Kirshner Content defaulted on the promissory note.10                        
               In a confidential business plan dated July 1996, Kirshner              
          Content proposed the issuance of stock in a public offering for             
          at least $25 million.  As the managing director of Equisource,              
          petitioner was named as a member of the support team                        
          participating in the organization and financing of Kirshner                 
          Content.                                                                    
               On or about March 7, 1997, C&C Partners filed suit in Texas            
          against petitioner and Thurmond for payment of the $279,440                 
          promissory note due to Kirshner Content’s default.  Petitioner              
          and Thurmond retained the law firm Baker & Botts, L.L.P., in                
          Houston to represent them in the ensuing litigation.11                      
               As previously stated on the Schedule C that petitioner                 
          submitted with respect to Kirshner Content, petitioner reported             
          zero gross income for the activity and claimed deductions for               
          various expenses related to the activity:  (1) A bad debt in the            
          amount of $7,118; (2) legal and professional fees in the amount             


               10 On or about Sept. 18, 1996, C&C Partners, LLC, filed suit           
          in New York State court against petitioner, Thurmond, and Licht,            
          the three guarantors, and, a month later, the case was removed to           
          Federal District Court.  With respect to petitioner and Thurmond,           
          the case was removed to Texas.  The case against Licht in New               
          York continued.  In that court proceeding, judgment was entered             
          in favor of C&C Partners, LLC, in November 1997.                            
               11 The record is not clear with respect to the ultimate                
          resolution of the Texas case involving petitioner and Thurmond.             





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