Opinion ID: 306553
Heading Depth: 2
Heading Rank: 2

Heading: The Teacher's Loan

Text: 7 On August 3, 1971, at a time when ECO was undergoing severe financial problems, the corporation, through Koenig its president, issued a press release to the Dow Jones wire service. The release stated in part: 8 On July 28, 1971, the Company renegotiated the terms of approximately $14 million in loans from the Union Bank, its prime lender. Under the renegotiated agreement, $4 million is due upon demand and the remainder is due on 4/15/72. The Company has other demand loans and overdraft privileges with various banks in the U. S. and Europe. If the $4 million loan is called by Union Bank or other demand loans are called by other banks, that event could give Union Bank the right to declare the remainder due immediately. Union Bank has stated that it has no present intention of calling the demand loan. 9 What the release failed to mention was that on July 28, 1971, Teacher's Insurance and Annuity Association informed ECO that it would not provide the corporation with a $4 million loan which ECO had planned to use to repay the demand loan from Union Bank. Moreover, the press release, while also discussing ECO's European prospects, did not mention the proposed transfer of voting control among its European subsidiaries. By reason of these failures to disclose material information, the press release violated Section 10 of the Act and Rule 10b-5. 5 See SEC v. North American Research & Development Corp., 424 F.2d 63, 75 (2d Cir. 1970). 10