Opinion ID: 745324
Heading Depth: 2
Heading Rank: 2

Heading: Digital Microwave

Text: 8 On March 20, 1991, AT & T's Board of Directors authorized the acquisition of Digital Microwave, a company with which AT & T had been engaged in joint development projects since 1989, for an amount not to exceed $325 million. On the same day, Brumfield entered Alger's office, closed the door, told him that something was happening between AT & T and Digital Microwave, although he wasn't sure what, and told Alger that he should find out more about the company. Alger testified that he was almost positively sure that Brumfield had learned that something was happening involving Digital Microwave as a result of his position with AT & T, although he later testified that he was not certain of Brumfield's source. 9 Alger testified that he immediately called Sweeney and another friend, Larry Friedman, to get information about the company. After he reported what he had learned to Brumfield, Alger testified that he and Brumfield arranged for Alger to buy shares of Digital Microwave on Brumfield's behalf. Alger testified that he then contacted Flanagan, O'Brien, and Friedman, told them about the tip from Brumfield, and asked them to purchase shares for Alger in Digital Microwave. Flanagan made the purchases that Alger had requested, and additionally purchased almost $300,000 of Digital Microwave stock himself on March 28. Flanagan made these purchases through a corporate account that he opened for this purpose, as well as by arranging for his attorney and friend, John Lynch, to purchase stock through the account of Warren Smith, Lynch's law partner. Smith bought 27,500 shares of Digital Microwave's common stock, at a cost of approximately $445,000. 10 On March 29, 1991, AT & T called off the planned acquisition because Digital Microwave's stock price had risen enough to cause the cost of the acquisition to exceed the $325 million limit set by the Board at its March 20 meeting. The price of Digital Microwave stock on the next trading day, April 1, dropped significantly. Brumfield notified Alger on around April 1 that nothing [was] going to happen with Digital Microwave, and that the shares should be sold. Alger testified that he then called Flanagan, O'Brien, and Friedman and instructed them to sell the shares, which generated a modest profit when they were subsequently sold. Flanagan did not sell the shares that he had purchased on his own behalf until April 16, resulting in a loss of approximately $47,800.