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Ethics and Suckers My personal interest in trading stocks and bonds led me to analyze this case which involves ethics in business Wheat First is a brokerage company and a member of the New York Sock Exchange and the NASD They operate in the city on New York and are able to make recommendations on what stocks they believe will perform well Their clients Philip Friedman and Carl Defreitas filled a complaint to the SEC alleging misinterpretation concerning Zitel a developer of computer software applications hoping that the plaintiffs would open brokerage accounts with Robert Cohan a representative of the Wheat First Corporation Cohan claimed that he had first hand knowledge about where the stock was going He told them that Wheat First has access to two executives in the Zitel corp which claimed they would become the next Intel after they marketed their new software they developed to fight the Y2K Bug He also stated that Zitel was entering a joint venture with IBM corp and that would cause the stock to jump to 150 per share a 200 gain He failed to disclose however that Wheat First would cease to be a market leader in Zitel due to the companys volatility and because Wheat First had incurred large losses by investing in Zitel Furthermore the only information they received about the company was from publicly disseminated newsletters and periodicals and it did not even have analysts covering the stock Friedman sold shares on stock in another company in order to buy 4000 shares of Zitel at 48 per share and another 2000 shares at 43 Defreitas purchased 1000 shares and lost 75000 compared to Friedmanss 500000 not including margin interest charges when the stock plummeted to 14 per share and both men could not answer the margin calls Their holdings were liquidated and they felt Wheat First was responsible The court requested the NASD review the case and the NASD
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