transfer funds from the money market account with which to pay the taxes.
Mr. Corigliano made the arrangements for the loan and instructed Mr. Weaver that when the loan proceeds arrived, they were to be used to pay the delinquent taxes. The loan proceeds were to be approximately $ 40,000.00, which was more than sufficient to cover the amount of the taxes for the July 14th, July 28th and August 11th payroll periods.
Anticipating further money shortages, Mr. Corigliano arranged a meeting between himself, Mr. Owens, Generic's attorney, and a bankruptcy attorney to discuss corporate bankruptcy. The meeting was held on August 8, 1989. That morning, before attending the meeting, Mr. Corigliano signed the payroll checks for the payroll period ending August 11, 1989. After the meeting, Mr. Owens informed Mr. Corigliano that bankruptcy was not an alternative, and further told him that the loan proceeds would not be used to pay the delinquent payroll taxes but would be used, instead, to pay a trade creditor in order to keep Generic in business. As stated heretofore, Mr. Owens remained in control of the shareholder committee.
Mr. Corigliano knew that, despite the fact that he had negotiated the loan for Generic for the specific purpose of paying the payroll taxes, he had no authority to go forward on his own to use the loan proceeds to pay the taxes. After being informed by Mr. Owens that the taxes would not be paid from the loan proceeds, Mr. Corigliano determined that he had nowhere else to find additional money, and therefore had no alternative but to resign from Generic. The next day, on August 9, 1989, Mr. Corigliano delivered his letter of resignation to Mr. Owens. After receipt of his letter of resignatin, Mr. Corigliano had no decision-making authority in Generic.
The funds from the loan were received on August 23, 1989, approximately two weeks after Mr. Corigliano resigned. As of this date, payroll taxes were delinquent for the pay periods ending July 14, July 28 and August 11, 1989. After receipt of the loan proceeds, Generic's bank account carried balances in excess of the amounts owed for the delinquent payroll taxes for the rest of the month of August, 1989.
The loan proceeds were not used to pay the delinquent payroll taxes but, instead, were used to continue the operations of Generic and to pay creditors. Mr. Weaver was on vacation when the loan proceeds were received by Generic and when the proceeds were used to pay creditors. When Mr. Weaver returned from vacation, he resumed signing payroll checks. However, as stated heretofore, although the payroll account required only one signature, Mr. Weaver at no time possessed the authority to pay the taxes, nor did he possess the authority to transfer funds from the money market account to the payroll account for the payment of the taxes. Mr. Corigliano sold his stock to Generic for $ 262.50 plus indemnification against corporation liabilities including the delinquent taxes, and a continuation of his salary and benefits for one year. The buy-out agreement was not executed until November 1, 1989, because Mr. Corigliano and Mr. Owens could not agree on a non-competition clause. The one-year salary and benefits continued until October, 1989, and thereafter, were not paid.
Generic continued in business until January, 1991, although it filed for and operated under bankruptcy protection from May, 1990 until January, 1991. Mr. Weaver continued to be employed by Generic until it ceased doing business.
CONCLUSIONS OF LAW
26 U.S.C § 6672 (a) provides:
Failure to Collect and Pay Over Tax, Attempt to Evade or Defeat Tax.