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Business Organizations Keyed to Allen
SEC v. Texas Gulf Sulphur Co.
Citation:
401 F.2d 833 (2d Cir. 1968).Facts
In 1957, TGS began exploratory activities in eastern Canada. On October 29 and 30, 1963, a geophysical survey was conducted on the northeast portion of the Kidd 55 segment confirming the presence of an anomaly. An initial hole, K-55-1, was drilled on November 8, and showed a potentially high copper content. A visual estimate of the copper content of the core convinced TGS it was desirable to acquire the remainder of Kidd 55. The drilling hole was concealed and barren core was intentional drilled off the anomaly. The K-55-1 core was shipped to Utah for a full assessment and showed remarkable results.
Between November 12, 1963 and March 31, 1964, when drilling resumed, certain individual defendants purchased TGS stock. Additionally, on February 20, 1964, TGS issued stock options to 26 of its officers and employees. At that time neither the Board of Directors or Stock Option Committee had been informed of the K-55-1 results.
On Saturday, April 11, 1964, the New York Herald and New York Times made unauthorized reports of TGS drilling inferring a rich strike. In response, TGS drafted a press release to quell the rumors stating that the reports were exaggerated. The press release appeared in the morning papers on Monday, April 13. On the same day, an invited reporter for The Northern Miner visited the drill site and confirmed a 10 million ton ore strike. The article was published in the April 16 issue.
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