Assignment
Short essays require a statement of issues, relevant facts, analysis, and conclusions. If you need additional information to provide a yes or no answer in the first instance, please state what additional information you need and why.
1. Terry is a director and the majority shareholder of New Old Investment Corporation (NOIC). Terry buys, for $1,500, an option to purchase a tract of real estate for $100,000 from Real Estate, Inc. Terry forms My Property, Inc., to hold the option. As the majority shareholder and director of NOIC, Terry directs NOIC to authorize the purchase of the land from My Property, Inc. for $200,000. Terry then has My Property, Inc. buy the land and sell it to NOIC, with My Property, Inc. taking back a purchase money mortgage, that is, with My Property, Inc. loaning the purchase money to NOIC at a 10 percent interest rate. William, a minority shareholder of NOIC, complains to NOIC's board, which takes no action. William files a suit on his own behalf against Terry. Will William prevail? If so, why will William prevail. If not, why not? If not, how might he prevail?
2. Big Corporation was taken private by a group led by Mr. Little and Investment Banking Firm "IBF." The transaction occurred after quite a few years of disappointing sales performance of Big Corporation's products due to changing consumer preferences. Big Corporation management continued to publicly express confidence in Big Corporation's prospects, but despite that, the stock price dropped a significant amount. A special committee of Big Corporation's Board of Directors negotiated a sale of the corporation and they also approved the transaction. The corporation, in its disclosures to its stockholders, emphasized that the deal price represented a large premium over the common stock's trading price. Minority shareholders brought a class action that challenged the transaction. They asserted breach of fiduciary duty. Will the minority shareholders prevail?
3. Lee is an officer of Energy Fuel, Inc. Lee has just learned that an Energy Fuel, Inc. engineer recently developed a new and inexpensive method for converting hydrogen into fuel. Lee buys some Energy Fuel, Inc. stock from Gert, and Lee subsequently sells the stock to Holly making significant a profit. Gert claims that this is a violation of federal insider trading laws. Is Gert correct? If so, what federal law has Lee violated and why?
4. Accountant is having Accountant's offices painted by Trusty Painter. During the paint job, Accountant , the CPA for a member ("Client") of the Board of ABC Corporation, is reviewing the tax records that Client has dropped off at Accountant's office. Among the records is an internal ABC Corporation memo that sets out the terms of an impending sale of ABC Corporation, a publicly traded corporation, to another publicly traded corporation that is a leader in the same industry. Accountant immediately purchases ABC Corporation stock. Excited about the events of the day, Accountant decides to take a long lunch break. While Accountant is out for lunch, Trusty Painter happens upon the ABC memo that is open on Accountant's desk, and Trusty Painter immediately calls Trusty Painter's brother, a stock broker, who promptly purchases ABC Stock for himself and on behalf of Trusty Painter. Two days later there is a public announcement of the sale and acquisition, and the accountant and the broker, for himself and as agent for his Trusty Painter, sell their stock reaping substantial gains. Did any of these individuals act improperly? If so, how and why? What might the government allege? Would this be a civil action or a criminal action? Would both be possible? What penalties or other relief might be granted? Is there a private cause of action? If so, against whom, and on what grounds?