Scott Greensburg, CEO of Media Corporation, owns and operates radio stations. Media Corporation became interested in acquiring EZ Comm, Inc., which also owned radio stations. To initiate negotiations for an acquisition, Greensburg met with EZ's CEO, Alan Bauxter, on July 12. Two days later, Scott phoned his brother Matthew, who, the next day, bought 3,000 shares of EZ stock. Matthew discussed the deal with their father Jim, who bought 20,000 EZ shares on four days later. On July 25, the day before the EZ bid was due, Scott phoned his parents' home, and Matthew bought another 3,000 EZ shares. The same routine was followed over the next few days, with Scott periodically phoning Matthew or Jim, both of whom continued to buy EZ shares. Media Corporation's bid was refused by EZ, but on August 5, EZ announced its merger with another company. The price of EZ stock rose 30 percent, increasing the value of Matthew and Jim's shares by $400,000 and $600,000, respectively. Assume the Securities and Exchange Commission (SEC) filed a civil suit in a federal district court against Scott.

Instructions:

• Consider the above fact situation and then discuss what law(s) the SEC is likely to claim were violated.
• Should the court hold Scott liable, why or why not?
• What sanction, if any, should be imposed?