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POL SCI 179- Midterm Exam Guide - Comprehensive Notes for the exam ( 20 pages long!)


Department
Political Science
Course Code
POL SCI 179
Professor
sellgren
Study Guide
Midterm

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UC-Irvine
POL SCI 179
MIDTERM EXAM
STUDY GUIDE

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CASE BRIEFS Chapters 1-3
Stock Fraud Direct Reliance
Fewell v. Kozak et al.
1. Parties
a. Plaintiff Fewell
b. Defendant Kozak
c. Relationships: Hornibrook was Fewell’s personal securities broker and advisor.
i. Kozak and Siegel are Hornibrook’s colleagues. Hornibrook made a deal
with Kozak for him to buy shares in Gantry.
ii. Siegel agreed to allow plaintiff to purchase the gantry stock as long as P
agreed to share profits.
2. Issue
a. Has plaintiff stated a claim for Rule 10b-5 securities fraud by pleading sufficient
facts to satisfy all of the required elements?
3. Holding
a. Yes; Plaintiff Fewell won the case.
4. Key facts
a. Siegel called plaintiff and confirmed
i. H’s description of Gantry
ii. Conditions upon which he (Siegel) would sell to plaintiff
iii. Gantry’s business contracts and how they extended to AZ
iv. Did NOT say Gantry was dissolved
b. Plaintiff’s claims against H and Shearson were arbitrated, with the result ending
in the favor of the plaintiff
i. Siegel motioned for arbitration but motion was denied because Siegel
wasn’t covered under the H arbitration agreement.
5. Legal reasoning
a. Legal standard: Rule 10b-5
b. Scheme to defraud
i. Material Misstatement
1. Siegel’s description of Gantry as “growing and prosperous” isn’t
actionable, but a general prediction (puffery). Does NOT satisfy.
2. Phone conversation only repeated what H had previously
conveyed. Does NOT satisfy.
3. P’s claim about Gantry extending to AZ isn’t supported by any
information which suggests the claim is false. Does NOT satisfy.
4. Siegel’s failure to inform Plaintiff that Gantry was dissolved by
Illinois Secretary of State in relation with the info given on the
phone. DOES satisfy.
ii. Reasonable Reliance
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1. Siegel claims it was unreasonable for P to rely on his
representations. Court finds the phone call the extra push to close
the deal. (See p. 18 for reasonableness factors)
2. Siegel aligned himself with H, a confidante of Fewell’s. Thus, the
complaint alleges that Siegel should have known that the info he
gave was supported by the trust of the F/H relationship. (DOES
satisfy).
iii. Proximate Cause of Injury
1. Mere purchase of stock in a defunct corporation is sufficient injury
for purpose of stating a fraud claim. (DOES satisfy)
SEC v. Park (Tokyo Joe) Judge Kocoras
1. Parties
a. Plaintiff SEC
b. Defendant Tokyo Joe
2. Issue
a. Has plaintiff stated a claim for Rule 10b-5 securities fraud by pleading sufficient
facts to satisfy all of the required elements?
3. Holding
a. Yes; Defendants’ motion to dismiss denied. SEC wins case.
4. Key Facts:
a. Park posted messages on public financial internet bulletin boards, which allow
people to electronically post and reply to messages regarding stocks, investments,
etc.
b. Created email list and sent recipients stock tips.
c. Created website from which people can receive emails about his stock picks for
$29/month
d. Set up a new site that continues to operate under his control. Consisted of limited
area for public and a more expanded area for fee paying members ($299 a year)
e. Created chat room acting as a forum and conducted dialogues with members
about stock picks.
f. Collected $1.1 million in his societe anonyme membership fees.
g. Through his advice to the thousands of members on his website, the Sec alleges
that Park was essentially able to manipulate and affect the price of stocks he
would buy and sell.
i. Participated in scalping i.e., encouraged members to buy shares of stocks
he already owned to inflate the price and then sell the stock and profit.
ii. Was selling the same stock he advised members to purchase.
h. Never revealed his true interests
5. Legal Reasoning
a. Legal standard: rule 10b-5
i. Scheme to defraud
1. Material misstatement
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