Q1. Is it ethical for a business person to purchase the shares of stock in a competing company in order to gain access to its books and records?
Q2. A group of Tellabs shareholders accused the corporation’s CEO, Richard Notebaert, of engaging in a scheme to deceive the investing public about the true value of Tellabs’s stock. Their complaint stated that Tellabs and Notebaert had engaged in securities fraud and in violation of Section 10(b) of the Securities Exchange Act of 1934. Specifically, they claimed that Notebaert knowingly mislead the public in four ways. First, he made statements indicating that demand for Tellabs’s flagship networking device was continuing to grow, when in fact demand for that product was waning. Second, Notebaert made statements indicating that Tellabs’s next-generation networking device was available for delivery and that demand for that product was strong and growing, when in truth the product was not ready for delivery and demand was weak. Third, he falsely represented Tellabs’s financial results for the fourth quarter. Fourth, Notebaert made a series of overstated revenue projections, when demand for Tellabs’s products was drying up and production was behind schedule. Based on Notebaert’s sunny assessments, the Shareholders contend, market analysts recommended that investors buy Tellabs’s stock. Explain the analysis a court would use to determine if this complaint met the scienter requirement.