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Sex Sells Contracts: Why Not Securities Law?

Dave Hoffman

Dave Hoffman is the Murray Shusterman Professor of Transactional and Business Law at Temple Law School. He specializes in law and psychology, contracts, and quantitative analysis of civil procedure. He currently teaches contracts, civil procedure, corporations, and law and economics.

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4 Responses

  1. anonymous says:

    Having worked for a publicly-held employer where the president/CEO was engaged in an adulterous relationship, I can tell you that the fiscal effect of dalliance goes beyond the immediate participants. Consider the Jack Welch case, where the retirement “package” of GE’s former CEO became “assets” in an acrimonious divorce. In the case of my ex-employer, the itemization (demanded as part of the divorce proceedings) of “non-cash” services provided to “all officers and directors” threatened to sink the company’s prospectus (this was pre- Sarb-Ox). A fast resignation saved the company’s disclosures.

    A CEO whose wife is not happy with his extra-marital prowess is a definite fiscal liability.

  2. Interesting hypo. I agree that there probably is enough of a materiality argument to at least survive a motion for summary judgment. Hence, I think the lesson to take from the hypo is to avoid statements like cohesive, ethically sound, 100%, etc. in SEC filings. Absent these statements, I don’t think the company would have any duty to disclose the affair. As an aside, no securities lawyer should ever let “100%” appear as a modifier in an SEC filing.

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