Leslie Neadeau was the president of T. O. N. M. Oil & Gas Exploration Corporation (TONM). Charles Lazzaro was a registered securities broker employed by Bateman Eichler, Hill Richards, Inc. (Bateman Eichler). The stock of TONM was traded in the over the counter market. Lazzaro made statements to potential investors that he had “ inside information” about TONM, including that (1) vast amounts of gold had been discovered in Surinam and that TONM had options on thousands of acres in the gold producing regions of Surinam; (2) the discovery was “ not publicly known, but would be subsequently announced”; and (3) when this information was made public, TONM stock, which was then selling for $ 1.50 to $ 3 per share, would increase to $ 10 to $ 15 within a short period of time and might increase to $ 100 per share within a year.

Potential investors contacted Neadeau at TONM, and he confirmed that the information was not public knowledge. Relying on Lazzaro’s and Neadeau’s statements, the investors purchased TONM stock. The “ inside information” turned out to be false, and the shares declined substantially below the purchase price. The investors sued Lazzaro, Bateman Eichler, Neadeau, and TONM, alleging violations of Section 10(b) of the Securities Exchange Act of 1934. The defendants asserted that the plaintiffs’ complaint should be dismissed because they participated in the fraud. Who wins? Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U. S. 299, 105 S. Ct. 2622, 1985 U. S. Lexis 95 (Supreme Court of the United States)