Machine Malfunction. Bruno, the president of a corporation operating workout facilities, convinced the board of directors to approve a large purchase of a type of fitness machine called "Perfect Body." Bruno had carefully investigated the machine and did a presentation to the board on its purported benefits. Unfortunately, after the purchase, it was announced that "Perfect Body" was actually a very dangerous machine that should not be used. The manufacturer of "Perfect Body" went bankrupt, and the corporation lost $200,000 on the purchase of the machines. The shareholders are furious and want to sue Bruno and the directors. The board of directors agrees to allow Frances, the ringleader of the shareholders, to purchase stock of the company at below its fair market value. She purchases a considerable amount of stock on that basis, but says that the shareholders plan to continue with an action against Bruno and the board members. Which of the following is true regarding the liability of Frances, if any, for purchasing the stock at below its fair market value?

Multiple Choice

• She is liable for paying the difference between the price she paid for the shares and the stated corporate value of the shares, plus a $10,000 penalty.
• She is liable for double the stated corporate value of the stock in addition to any price she already paid.
• If the board wanted to offer it to her, they had that right, and there is no consequence to Frances because she proceeded with the complaints of the shareholders.
• She is liable for paying the difference between the price she paid for the shares and the stated corporate value of the shares.
• She is liable for the stated corporate value of the stock in addition to any price she already paid.