Gotham Partners is moving to liquidate one of its big stock holdings, as securities regulators step up an inquiry into the hedge fund's business practices.

The hedge fund, which is in the process of shutting down its major investment funds, filed a notice Wednesday that it intends to sell its 31% stake in Imperial Parking ( IPK), a Canadian-based operator of parking lots in Canada and the U.S.

Gotham effectively controls Imperial, a company with more than $120 million in annual revenue and about $2 million in net income. William Ackman, one of the hedge fund's co-founders, has been chairman of Imperial for the past two years.

Gotham, which has an agreement with Imperial not to sell its shares until May 23, disclosed its intention in a filing Wednesday with the Securities and Exchange Commission. The delay is intended to give Imperial a chance to explore "strategic alternatives."

Imperial, a thinly traded stock with a market capitalization of $41 million, rose a nickel on Wednesday to close at $22.70.

The Gotham stock liquidation comes at a time that New York Attorney General Eliot Spitzer is looking into the hedge fund's research and trading practices. The planned stock sale also reveals another layer in what is emerging as a tangled web of intersecting business deals involving Gotham, Ackman and several independent real-estate companies.

In particular, Spitzer is investigating allegations that Gotham and other hedge funds conspired to drive down the price of some stocks by issuing negative research reports on those companies. Spitzer launched the informal investigation after officials with bond insurer MBIA ( MBI) complained last week about a highly critical research report Gotham issued about the company in early December.

At the time Gotham published the report on MBIA, the hedge fund had taken a short position in MBIA shares -- a market bet that a company's stock will in fall.

But Gotham's problems began well before Spitzer began poking around.

In the fall, a number of high-profile investors in Gotham -- which at one time had more than $300 million in assets -- began pulling money out of the fund. One of the investors seeking to redeem his investment is Dirk Ziff, a former Harvard University classmate of Gotham's founders and co-chair of Ziff Brothers Investments. Ziff's family founded the Ziff Davis publishing empire.

Gotham also found itself in a financial squeeze after a New York state judge put the kibosh on its plan to merge a small but cash-rich real estate investment trust with Gotham Golf -- a money-losing golf course company that Gotham controls. The judge temporarily nixed the proposed $81 million merger between Gotham Golf and First Union Real Estate Equity and Mortgage Investments ( FUR), saying it would be unfair to First Union's preferred shareholders.

The merger would have been highly beneficial to Gotham because it would enable the hedge fund to cash out a 16% ownership stake in First Union for a payment of $13.7 million. Gotham also would be reimbursed in full for the $22 million in loans it made to Gotham Golf, which operates 25 courses in Florida, New Jersey, Pennsylvania and four other states.

In many ways, Gotham ties to First Union are similar to its dealings with Imperial. Up until a few weeks ago, Ackman was chairman of First Union's board. Ackman and Gotham effectively gained control of First Union in the late 1990s by buying up the REIT's stock and then systematically selling off most of it properties.

For a time, First Union's board was stacked with directors with close ties to Ackman and Gotham. For instance, David Berkowitz, the other co-founder of Gotham, briefly served on First Union's board. Another board member was David Klafter, Gotham's general counsel.

Meanwhile, Imperial has some ties to First Union besides Ackman. The parking company's vice chairman, Daniel Friedman, is a former First Union president and chief executive. Friedman will now head a special committee of the Imperial board to explore other options for the company before Gotham sells its stock.