$22\mathrm{.}6$

In $1998,$ after working at two banks for about $10$ years, Bryan J$.$ Mitchell helped found MCG Capital Corporation, a venture capital firm that invested in the media, communications, and technology sectors$.$ MCG went public in $2001,$ and Mitchell served as its CEO and chair of the board. Various documents filed with the SEC stated that Mitchell $$earned a B$.$A$.$ in Economics from Syracuse University.$$ In fact, he attended Syracuse for only three years and did not graduate. After being pressured by a journalist, Mitchell disclosed the misrepresentation to the MCG board. The same day, the company issued a press release correcting the statement.

The press responded negatively to $$another CEO that lied about his r$$sum$$ and speculated about $$what else might not be right.$$ On the day the press release was issued, MCG$$s stock price dropped from $$11\mathrm{.}85$ per share to $$8\mathrm{.}40,$ but it fully recovered within a month.

Shareholders sued, alleging that the misrepresentation violated section $11$ of the $1933$ Act, section $10($b$)$ of the $1934$ Act, and Rule $10$b$5.$ Was Mitchell$$s lie about having a college degree material? Would your answer be the same if a CEO lied about having helped to take a company through an initial public offering and subsequent acquisition by another company and having led a pharmaceutical company from incorporation to human clinical trials? If you were a member of the MCG board, would you be comfortable keeping Mitchell as CEO once you learned that he had lied about having a college degree? $[$