Opinion ID: 2361133
Heading Depth: 2
Heading Rank: 1

Heading: Zaucha's Alleged SEC Violations

Text: Appellants argue that Zaucha committed three undisclosed violations of the federal securities law when he purchased 75,000 shares of Northstar stock in December 1996: (i) he failed to disclose his intent to buy the Northstar stock on his Schedule 13D; (ii) he purchased the stock while in possession of material non-public information; and (iii) he failed to file a Form 4 in January 1997, after purchasing the shares. Appellants maintain that Zaucha should have disclosed these alleged securities law violations in his solicitation materials because the stockholders would have considered that information important in deciding whether to vote in favor of Zaucha and his slate of nominees. We find appellants' argument unpersuasive. The record establishes that Zaucha did not realize that he had committed any securities law violations at the time of the consent solicitation. [6] More importantly, Zaucha was never charged with any violations. It is settled Delaware law that a director need not make self-accusatory statements nor engage in self-flagellation by confessing to wrongdoing that has not been formally adjudicated by a court of law. [7] On a related matter, appellants complain that Zaucha misrepresented the reason for his termination. The Northstar board voted Zaucha out of office at a board meeting in February 1997, a few days after Zaucha began his consent solicitation. Appellants contend that they ousted Zaucha for cause upon discovery of his securities law violations, but Zaucha told the stockholders that his removal was retaliation from a desperate board. The trial court noted that the press release issued in connection with Zaucha's termination never mentioned the alleged securities law violations, and concluded that Zaucha had no duty ... to adopt his opponents' current explanation of why he was removed.... [8] The trial court's ruling was correct both as a matter of fact and law.