The allegations were that Ginsburg had communicated material nonpublic information to his brother Mark Ginsburg and to his father Jordan Ginsburg regarding EZ Communications, Inc., and Katz Media Group, and that Mark and Jordan had traded on EZ stock using that information.
The case was tried to a jury, which found that Ginsburg had violated the insider trading provisions. The district court initially ordered him to pay $1,000,000 in penalties but denied the SEC's request to enjoin him from violating securities laws in the future. Later the district court granted Ginsburg's renewed motion for judgment as a matter of law and vacated the judgment against him, because it concluded that the evidence was insufficient to permit a reasonable jury to find that he had tipped off his brother or father about inside information.
In order to establish liability under § 10(b) and § 14(e) of the Securities and Exchange Act and accompanying Rules 10b-5 and 14e-3, the SEC must prove that Ginsburg acted with scienter, “ ‘a mental state embracing intent to deceive, manipulate, or defraud.’
1. Scott Ginsburg served as chairman and CEO of Evergreen Media Corporation, an owner and operator of a group of radio stations. Ginsburg then began to show interest in acquiring EZ, another corporation that owned radio stations. After a brief meeting with Alan Box, the CEO of EZ, a phone call was made of which only the duration, 26 minutes, is known. The next Mark Ginsburg, the brother of CEO Scott Ginsburg, purchased 3800 shares of stock in EZ after discussing the purchase of this stock with Jordan Ginsburg, the father of he and Mark. Scott Ginsburg then talked to EZ’s investment banker, discussed the possibility of a bid, and signed a confidentiality agreement on July 16, the same day that Jordan Ginsburg purchased 20,000 shares of stock in EZ. The following day Scott received full disclosure of EZ’s financial status. Mark and Jordan continued...