Legal Environment 4th Edition by Jeffrey Beatty, Susan Samuelson

تمرين 7

ETHICS ETS Payphones, Inc., sold pay phones to the public. The company then leased back the pay phones from the purchaser, promising a fixed 14 percent annual return on their investment. Although ETS's marketing materials trumpeted the "incomparable pay phone" as "an exciting business opportunity," the pay phones did not generate enough revenue for ETS to make the required payments, so the company depended on funds from new investors to meet its obligations to its existing customers. After ETS filed for bankruptcy protection, the SEC sued, alleging that ETS had been selling unregistered securities. Were the pay phone contracts securities under the 1933 Act? ETS advertised this investment as low-risk (offering a "guaranteed" fixed return). These sorts of advertisements are particularly attractive to individuals more vulnerable to investment fraud, including older and less sophisticated investors. Whether or not the pay phone contracts were securities, was it ethical to pitch what was, in fact, a high risk investment to vulnerable investors who were unable to assess the risks accurately? Were these actions right? How would the CEO of ETS have felt if someone had sold such an investment to his poor, elderly mother?