Full opinion text
MEMORANDUM OPINION AND ORDER SHADUR, District Judge. ■ Champion Parts Rebuilders, Inc. (“Champion”) seeks a preliminary injunction against a large number of defendants: 1. “Cormier Defendants,” comprising Odilon Cormier (“Cormier”), his company Cormier Corporation, Claude, Monique, Daniel, Nicole and Pierre Cormier and Suzanne Arena; 2. “Navon Defendants,” comprising Morris Navon (“Morris”), his brother Herman (“Herman”) and Blanche, Samuel, Valerie, Renee, Ruben and Stephanie Navon; 3. Rieger, Robinson, Harrington & Co., Inc. (“RRH”); and 4. Scott Hodes (“Hodes”); all stemming from claimed violations of Securities Exchange Act of 1934 (“1934 Act”) § 13(d), 15 U.S.C. § 78m(d) and 1934 Act § 14(a), 15 U.S.C. § 78n(a). After extensive accelerated discovery by the litigants, this Court conducted an evidentiary hearing (the “Hearing”), and the still-active litigants submitted post-Hearing findings of fact with supporting legal memoranda. In conformity with Fed.R.Civ.P. (“Rule”) 52(a), what follows are this Court’s findings of fact (“Findings”) and conclusions of law (“Conclusions”). Findings of Fact A. Parties and General Background 1. Champion is an Illinois corporation with its principal place of business in Oak Brook, Illinois. In addition to its headquarters in Oak Brook, Champion operates four main plants located in various parts of the country and employs some 2400 persons nationwide. It is the largest domestic independent remanufacturer of products for the automobile, truck and farm equipment aftermarket, with 1986 sales of approximately $110 million (Schwartz Tr.). 2. In exchange for each rebuilt automotive part sold by Champion, it is obligated to take back, and issue a credit for, an old part (the “core”). Cores are the raw material for Champion’s rebuilt products. Champion’s customers, in turn, rely on prompt identification and receipt of credit for the returned cores and prompt delivery of the rebuilt product. Champion thus depends on its reputation for reliability and consistency of supply. Its market is competitive and profit margins are narrow (Schwartz Tr.; PX 27, 28). 3. Sales to original equipment manufacturers are Champion’s most important emerging business development (Schwartz Tr.). In 1986 Champion netted $5 million in sales to Chrysler Corporation (“Chrysler”) alone (Savini Tr.). Chrysler is the customer with the greatest potential for Champion (Schwartz Tr.; Savini Tr.). Through sales to Chrysler and other original equipment manufacturers, Champion obtains access to valuable technical information, including parts specifications and manufacturing processes, and receives back into inventory the cores from warranty repairs, which provide a valuable supply of late model parts (Schwartz Tr.). 4. Champion has approximately 2.4 million common shares issued and outstanding (1.9 million before a September 18, 1986 5-for-4 stock split). Its shares are registered with the SEC pursuant to 1934 Act § 12(g). They have been and are publicly traded as a NASDAQ National Market Issue in the over-the-counter market under the identifying symbol “CREB” (Schwartz Tr.). 5. Before June 1986 Champion’s shares were widely held, with the exception of two significant blocks: one (approximately 16% of the outstanding shares) held by the Bass family interests, and the other (approximately 18% of the outstanding shares) held by the Gross family interests. Schwartz held, and still holds, approximately 4% of the outstanding shares (107,000 shares) (Schwartz Tr.). Trading in Champion’s shares was orderly, with relatively constant volume and small price fluctuations. Trading volume was in the hundreds or thousands of shares per day and the bid-asked spread was narrow, reflecting an active or liquid market (Schwartz Tr.). 6. Cormier Corporation is a New Hampshire corporation engaged in the manufacture of textile products, with its principal place of business in Laconia, New Hampshire. Cormier is its chief executive officer and the principal owner of it and other corporations. Cormier Defendants also comprise Claude, Monique, Daniel, Nicole and Pierre Cormier and Suzanne Arena, all members of Cormier’s family residing in New Hampshire (Cormier Tr.). 7. Navon Defendants comprise Morris, Herman, Blanche, Samuel, Valerie, Renee, Ruben and Stephanie Navon, all members of the same family residing in New York (M. Navon Tr.). 8. RRH, a Delaware corporation with its principal place of business located in New York, is a registered investment ad-visor. Jackson Robinson (“Robinson”) is President of RRH (PX 6). 9. Hodes is a partner in the Chicago law firm of Arvey Hodes, Costello & Burman and resides in Chicago, Illinois. Hodes concentrates his legal practice in corporate and federal securities law (Hodes Tr.). B. Pre-Existing Relationships 10. All activities of Cormier Defendants, Navon Defendants and RRH looking toward their acting in concert in connection with Champion, and ultimately in Cormier’s asserting control over Champion, were coordinated by two brokers at Oppenheimer & Co., Inc. (“Oppenheimer”) — Daniel O’Neil (“O’Neil”) and Peter (“Tony”) Russ (“Russ”) — operating literally from a single office at Oppenheimer in New York City. O’Neil was the broker for Cormier, Herman Navon and RRH and their numerous customers in whose accounts he placed Champion stock during the summer of 1986 and whose “support” was later claimed by Cormier when he, acting for the group, demanded control of Champion. Russ was also the broker for Hodes and Sheldon Gray (“Gray”). It was O’Neil and Russ— and other Oppenheimer brokers — who initially targeted Champion as a. takeover candidate. Through their broker-agents, Cormier Defendants, Navon Defendants and RRH thereupon set their sights upon acquiring substantial shareholdings in Champion. 11. This was not the first instance in which the same parties had invested and acted together in a corporate control contest. Only a few months earlier in 1986 Cormier, Morris and Herman, a number of O’Neil’s clients, some of Cormier’s friends and associates, some of the Navons’ friends and associates and RRH were all shareholders in United Federal Savings Bank of Manchester, New Hampshire, and joined in opposing a merger of that bank with another institution (Robinson 9-14; M. Navon Tr.). Cormier and Robinson, just as they later agreed to do (and did) with respect to Champion, split the legal fees and other expenses incurred in opposing the merger (Cormier Tr.). On the night before the shareholders’ meeting at the end of May 1986, Cormier, Robinson, O’Neil (and, according to Robinson, Morris) met in Manchester to coordinate their strategy for the meeting (Cormier Tr.; Robinson 16-19, 25-31). Next day the merger was approved over their opposition, but they resolved never again to enter such a contest without first having “all the chips on [their] side of the table” (a clear reference to having lined up all their votes) (Gray 136-37), thus setting the stage for their present foray. C. Initial Oppenheimer Interest in Champion 12. Early in May 1986 Russ saw Champion appear on a “Metz-Weinger” screen for companies displaying certain financial characteristics (Russ 10). That screen is used by Oppenheimer personnel to identify companies that “are worth a lot more dead than alive” — companies with “significantly understated values vis-a-vis what they’re being carried on the books for versus what they might be sold” (Russ 79-80). As Gray perceived it, such companies’ asset liquidation or breakup values are greater than their values as operating companies (Gray 41). 13. After Champion appeared on the “better dead than alive” screen, Russ began to discuss Champion with O’Neil (with whom he shared an office and a secretary), David Rosin (“Rosin,” another Oppenheimer broker), Michael Metz (“Metz,” an Oppenheimer Senior Vice President) and then Whitney George (“George,” another Oppenheimer broker). Russ told O’Neil, Metz, George and Rosin he had a prior relationship with Champion and was familiar with the company (Russ 10-11; O’Neil 18-19). 14. Russ and O’Neil discussed Champion’s supposedly substantial real estate holdings and other “hidden” asset values (O’Neil 18-24, 37-38). They were particularly interested in determining the liquidation value of Champion’s real estate (O’Neil 22). Russ went to see Metz in early May and brought Metz the public information he had assembled (Russ 10-11, 39, 88; Metz 11-12). Metz concluded one of the “primary reasons” Champion was so “cheap” was that it “had an unusually high amount of real estate ... a lot of which looked like it was not necessary for use in the business” (Metz 12). About the time of those conversations, Metz made informal appraisals of the real estate and determined the probable breakup value of Champion (PX 14). Russ and Metz concluded “that if all of the real estate were sold and all of the other assets were liquidated, we would realize at least $19 per share” (Russ 79-80, emphasis added; PX 14). Russ reported the breakup analysis conclusions to his office-mate O’Neil (Russ 11). 15. Russ and O’Neil began to form a plan to capitalize on the value of Champion’s assets. When asked how the “hidden asset” value of the company’s real estate could be realized, Russ said, “You sell it” (Russ 41). In like manner, Russ said of all aspects of “hidden asset values,” “If they were to be realized they would have to be sold” (Russ 75). D. Initial Oppenheimer Solicitations 16. Russ and O’Neil were talking constantly about Champion, including its liquidation value, during May (O’Neil 21; Russ 89-90). As Russ and O’Neil began to solicit their accounts (Russ 24-27; O’Neil 37), and throughout the period from May through November 1986, each was aware of the other’s activities (Russ 70; O’Neil 71). O’Neil necessarily knew of Russ’s purchases for and work with Hodes, Gray and Barry Silverstein (“Silverstein”), and Russ necessarily knew of the purchases through O'Neil by Cormier, Herman and RRH (Russ 68-71). 17. Asset value, breakup value and other fundamental changes in the structure of Champion and its business became the keystone of Russ’s and O’Neil’s solicitations to their clients. Russ and O’Neil told their clients (a) Champion was an “undervalued security with excess real estate” and inventory, (b) Bass Brothers — known takeover speculators — owned 16% of Champion and (c) it is “active investors who often do things to realize what you believe are the undervaluations of the company” (O’Neil 58-59; Metz 22-23). 18. Russ prepared a memorandum in May for Silverstein (who later sold his Champion shares). Russ’ memorandum said in part that after “investigation” and “several more conversations with Mike Metz” (PX 14): (1) Metz firmly believes that the total asset value is at least $19.00 after all debt reduction. He has had several informal appraisals of the real estate, and has confidence in his numbers. (2) The more I think about this situation, there is only one price to pay, were I going to propose a leveraged buyout. The price $11.50 per share____ (3) If in fact there are $19.00 per share of assets, the net purchase price could be $4.00, because, I am convinced that upon consummation of a transaction, sales of excess real estate assets could generate $7.50 per share, thereby reducing the net cost by the same amount. Russ sent a copy of that memorandum to Hodes and Gray (Hodes Tr.; Hodes 121; Gray 77), and there is every reason to believe its contents and the approach it reflected (if not the memorandum itself) were also communicated to Cormier, Robinson and one or both of Herman and Morris Navon. Thus the thrust of the Oppenheimer solicitation efforts was to induce clients, including all the defendants here, to participate in the plan to take control of Champion and profit, ultimately through the sale of Champion or its principal assets, in the “hidden asset values.” E. Involvement of Defendants (Other Than Hodes) Through Their Agents 19. In early May Metz began to purchase Champion shares for the investment partnership he controls (Metz 5). By the end of June Metz controlled approximately 55,900 of the then-outstanding shares (Metz 53, 55-58; PX 26). O’Neil and Russ told other Oppenheimer brokers about Champion, and they too began to purchase Champion shares for their customers. 20. By late June Metz (purchasing for his investment partnership) and various Oppenheimer clients (other than defendants) had acquired over 4.3% of Champion’s outstanding shares. Those shares were later included by O’Neil and Cormier as part of the 42% of Champion shares that they controlled when they demanded that the entire Champion Board resign (O’Neil 183 — 84; Cormier Tr.; PX 26). Those shares have never been disclosed in any Schedule 13D. 21. During May and June, Metz and Russ also entered into an agreement to buy all available shares of Champion “side-by-side”: that is, as large blocks became available they would effectively be jointly purchased and “allocated” by Russ and Metz (and later O’Neil) (Russ 37; PX 13). That plan was intended to avoid competition (O’Neil 79) and to gather shares “without overly disrupting the market” and causing the price to “appreciate precipitously” (Russ 68; George 65). Russ and Metz (and then O’Neil) thus sought to avoid alerting the marketplace to the fact they were accumulating and parking large amounts of shares in anticipation of a hoped-for takeover. 22. When O’Neil joined that side-by-side coordinated buying arrangement as to shares he was buying for his clients (principally Cormier, Herman and RRH) (O’Neil 53; PX 13), the Oppenheimer joint purchases were thus split in thirds (O’Neil 79). Once Russ and O’Neil received their portion of the available shares, they further distributed those shares on a wholly discretionary basis among their own customers, principally Cormier, RRH and the various customers O’Neil and Russ would later claim “supported” the takeover (O’Neil 52; Russ 37). F. Cormier’s Undisclosed Material Plans for Champion 23. From the very outset the Oppenheimer goal in taking a major position in Champion, and in seeking to interest its clients in doing so, has been to implement a radical restructuring of Champion by acquiring control, instituting major changes (not simply shifting its everyday business policies), then selling the company in 18-24 months (PX 5 at 18; PX 59, Int. Ans. 11). 24. O’Neil was an active mover in pursuing the goal referred to in Finding 23. In June he telephoned Cormier to report he had a company Cormier would be interested in and as to which he would be sending Cormier information (O’Neil 44-45; Cormier 36-39). O’Neil outlined the four points O’Neil discussed with all his clients as part of his set sales pitch on Champion (O’Neil 37-38): (a) Champion’s shares were selling below the book value of the assets. (b) Its real estate was “undervalued.” (c) Its inventory was “overinflated.” (d) Its marketing base needed to be broadened. (Cormier Tr.; Cormier 39-43). 25. O’Neil and Cormier discussed the points referred to in Finding 24 at length in mid-June (Cormier 39-43). Cormier testified those were the four items — items whose implementation (including, importantly, the sale of Champion’s real estate) was premised on a change of control at Champion — O’Neil said ought to be “given some attention and evaluated” by “outside people” (Cormier Tr.; Cormier 52-53). Cormier confirmed the purpose was not to improve the operating performance of Champion, but rather simply to increase the “book value” of the shares as a first step toward the ultimate sale of Champion in 18-24 months (Cormier 52, 98). 26. From the very inception of Cormier’s interest in Champion, evinced by his purchase of stock and his encouragement of relatives and friends to buy stock, Cormier had — and intended to accomplish if he could get into a position to do so — the purposes referred to in Findings 24 and 25. As time went on Cormier developed some of his own refinements in that thinking (such as the possible creation of master limited partnerships to acquire certain Champion assets, and the possible factoring of Champion’s receivables), but those variants do not — as defendants suggest— reflect an absence of definitive planning, such as to excuse the disclosure of the organic changes Cormier proposed. Nor of course did Cormier’s inability to implement those changes until he owned, controlled or could enlist the support of more shares excuse such disclosure. Finally the obligation to make such disclosure is (again of course) unaffected by the matters stated in Cormier-Navon Defendants Proposed Finding 1: Prior to [Cormier’s] acquisitions of Champion stock, he has never purchased sufficient shares in a public company to be required to file a Schedule 13D. He has never been a director of a publicly-held corporation, nor has he ever been involved in attempting a “takeover” of a publicly-traded company. Thus the initial Schedule 13D Cormier was required to file (as soon as he, or a group of which he was a member, owned or controlled over 5% of Champion’s stock) should have disclosed Cormier’s plans for change. 27. In essence the plans Cormier proposed from the very beginning (except for such variants as are mentioned in Finding 26) were the same — premised on the takeover and leading to the ultimate sale of Champion — as Cormier revealed, for the first time, to Champion on October 23 when he demanded its whole Board resign (Cormier Tr.). Some time after the June 1986 discussions with Cormier, Russ and O’Neil had confirmed the takeover plan in a memorandum entitled “Management Reorganization & Corporate Strategy” (the “Reorganization Strategy Memo”), which was later sent to Cormier and others (PX 17). Cormier acknowledges the memorandum “expounded on the four items” O’Neil discussed with him in early summer, items that assumed a change of control at Champion (Cormier 77-78). Cormier admits he used the memorandum in developing his plans for Champion (Cormier Tr.; PX 59, Int. Ans. 11). 28. There was no room for doubt in the Reorganization Strategy Memo as to the intended fundamental changes in store for Champion (PX 17 at 2, emphasis added): Reorganization: The first thing to be accomplished is control of the Board of Directors. The existing Board should resign in favor of a new Board. The new Board should consist of people who bring the following characteristics and objectives to Champion: ... Upon assuming control, the Board should agree to steering the Company on a course whose objectives are (1) Clean up the balance sheet (2) Eliminate excess capacity. (3) Sell the Company to the highest bidder withing (sic) two years of taking control. In like vein the memorandum concluded (id. at 7-8, emphasis added): If we can structure the Company to follow this path, within two years we should have a company earning 10 to 15% simple return on equity. The ability to be unleveraged with an above average return on equity should enable the Company to be sold for a significant premium to its current price. Yet none of the basic matters described in this and prior Findings — either the intention to gain control and thereafter to sell the company in 18-24 months or the proposed means for doing so — was disclosed in any of the defendants’ Schedule 13D filings made during the summer and fall of 1986. Instead Cormier did not refer to any such takeover plans in any Schedule 13D until November 25 (PX 5; see also PX 59, Int. Ans. 11). G. Formation of a 1934 Act § 13(d) “Group” 29. For the reasons stated in the following Findings, Cormier Defendants, Navon Defendants and RRH constitute a “group” for purposes of 1934 Act § 13(d). Because that was so and because all shared the intentions and goals for Champion already discussed in detail, (a) a Schedule 13D should have been filed as soon as their Champion holdings aggregated more than 5% of its outstanding shares and (b) that Schedule should have disclosed those intentions and goals. 30. O’Neil also told another client, RRH President Robinson, Champion was selling below book value and had “hidden assets” in the form of “undervalued” real estate (O’Neil 37-38). In mid-June RRH began to acquire a significant position in Champion. By the end of June RRH had purchased 77,500 of Champion’s then outstanding shares. RRH, as an O’Neil client, participated in the allocation scheme whereby the shares acquired by Oppenheimer were being quietly allocated among the group members to avoid alerting the market that a takeover was afoot. O’Neil’s accounts with both Robinson and Cormier were discretionary (Gray 151-52). 31. Cormier acknowledged O’Neil “probably” told him of Robinson’s interest in Champion (hardly surprising, given their prior collaboration in the United Federal Savings Bank control contest — see Finding 11) (Cormier 212). O’Neil later told Hodes and Gray “Mr. Robinson controlled Mr. Cormier” (see Finding 64) (Gray 133). Though this Court does not so find (Cormier did not appear during his Hearing testimony to be the sort of man literally “controlled” by anyone), it draws the reasonable inference that Cormier and Robinson had agreed (given their prior close collaboration and their sharing of the Oppenheimer-stimulated information and goals as to Champion) to act together in the holding and voting (to the extent necessary to accomplish the already-discussed goals) of their stock. 32. Morris is the personal accountant for Cormier and for Cormier’s various business interests, including Cormier Corporation. Morris has known and worked for Cormier for 20 years. Morris often talks with Cormier about Cormier’s financial matters, including his stock purchases. Because of his role as Cormier’s personal and business accountant, he knows much about Cormier’s investments (M. Navon Tr.). 33. While Morris was in New Hampshire with Cormier in mid-June, Cormier said he was interested in investing in Champion and asked Morris for his thoughts. Cormier gave Morris Champion’s annual report (which O’Neil had sent to Cormier), and Morris took it back to New York to study (M. Navon Tr.). 34. Morris discussed Champion with his brother Herman, an O’Neil client (H. Navon 64). In mid-June O’Neil called Herman and recommended Champion as an “undervalued situation” (H. Navon 52-54). Herman gave him an order “on the spot” (id.). Within days Herman placed an additional order for 5,000 shares, and he later increased the order to 10,000 shares (H. Navon 62-63; PX 15). Herman trades stocks for himself and for other family members (H. Navon 5). 35. Morris and Herman discussed Champion again at a family breakfast June 22. Herman said O’Neil thought the real estate was undervalued and the inventory was much higher than necessary. On June 23 Morris telephoned Cormier to give Morris’ views on Champion’s annual report. Morris told Cormier that, based upon his analysis and conversations with his brother, he intended to begin buying. Morris then placed his first orders for Champion shares (M. Navon Tr.; PX 2). 36. Beginning a closely parallel buying pattern, Cormier placed his first Champion order (for 10,000 shares) the very next day, June 24 (PX 1). Morris continued to talk with Cormier about Champion throughout the month of June. Cormier knew Morris was buying and other Navon family members were also investing in the company. Morris knew Cormier was buying (Cormier Tr.; M. Navon Tr.). 37. Morris and Herman have a network of relatives, friends and business associates (a number of whom know of Cormier and know the Navon brothers rely on Cormier’s advice) who follow the Navon brothers’ investment decisions. Morris or Herman or both told them about Champion, and they began purchasing Champion shares (M. Navon Tr.). Morris’ relationships with those individuals are close: They are clients, past and present employees, relatives and friends on whom he was sure he could rely for support (M. Navon Tr.). Later O’Neil would label this group the Navon “puppies” (see n. 18), and he and Cormier would count their shares among the 42% controlled by Cormier (Cormier Tr.; PX 24, 26). 38. Morris believed all he had to say was that he and Cormier were involved and the Navon “puppies” would purchase stock (M. Navon 161). As one Navon “puppy” said when Morris recommended Champion: “If you like Champion and Odie Cormier likes Champion, I love it” (M. Navon Tr.; M. Navon 170). Navon “puppies” comprise some 33 individuals and entities owning approximately 93,600 Champion shares (PX 24, 26). 39. In light of the numerous intertwined relationships among Cormier and Morris and Herman (including their close collaboration and their sharing of the Oppenheimer-stimulated information and goals as to Champion), this Court draws the reasonable inference that they had agreed from the outset of their purchases of Champion shares to act together in the holding and voting (to the extent necessary to accomplish the already-discussed goals) of their stock. Because of the control exercisable by Cormier, that agreement embraced all Champion shares owned by Cormier Defendants; and because of the control exercisable by Morris and Herman, that agreement also embraced all Champion shares owned by Navon Defendants. 40. By the end of June Cormier Defendants, Navon Defendants and RRH had become a “group” within the meaning of 1934 Act § 13(d) that owned in the aggregate 5.4% of Champion’s outstanding shares. H. 193k Act § 13(d) Violations by Defendants Other Than Hodes 41. Despite that months-earlier formation of a statutory “group,” no joint Schedule 13D was filed by Cormier, Navon or RRH until October 1986. Cormier Defendants did not file their first Schedule 13D until September 25, 1986 (PX 1). Navon Defendants did not appear in any Schedule 13D until October 2,1986 (PX 2). RRH did not file its first Schedule 13D until October I, 1986 (PX 6). 42. By not filing a joint Schedule 13D when required and by omitting highly material facts once any Schedule was filed, Cormier and Navon Defendants and RRH concealed: (a) their collective ownership of over 5% of Champion’s shares; (b) their joint agreement on the plans previously outlined, including their intention — if they acquired control of Champion — to implement the material changes already described, leading to a sale of the company in 18-24 months; and (c) the existence of the other Oppenheimer-controlled accounts and the fact they were working in concert with Oppenheimer to accomplish their objectives. Disclosure of the first of these items was not made until October 16, and none of the remaining items was disclosed until after this litigation had begun (PX 3, 5, 7). Nondisclosure of the first item might or might not have represented a material omission in terms of the potential effect on the investment decisions of other shareholders, but nondisclosure of the other items was certainly a material omission in that sense. Those intentions and plans on the part of a group of significant Champion shareholders, who were actively seeking to position themselves so they could implement those plans, was part of the “total mix” of information that 1934 Act § 13(d) required to have been made known to the market. Because such disclosure was not timely made and other shareholders were then trading in ignorance of material information, all subsequent acquisitions of Champion stock by members of the group were tainted by such nondisclosure, and all subsequent acquisitions of Champion stock by others later included in Cormier’s claimed 42% “control” of Champion — stock also acquired in a market distorted by such nondisclosure— may also be subject to equitable restraints. I. Hodes’ Pre-filing Involvement in Champion 43. Hodes first learned of the developing interest in Champion shares in May 1986 from Sheldon Gray (“Gray”), a client and neighbor (they live in the same building in Chicago) (Hodes Tr.). Hodes already knew generally of Champion, having been counsel for the underwriter of a Champion securities offering in the early 1970s (Hodes Tr.). Gray and his family had a business background in the automotive parts aftermarket, and Gray wanted to get back into that area of business. After Gray touted Champion to Hodes as a “takeover” candidate (PX 55), at Gray’s suggestion Hodes set up a Saturday lunch meeting to discuss Champion, attended by Gray, Hodes and two of Hodes’ senior law partners. Neither partner evinced any interest, but Gray and Hodes remained interested in Champion (Hodes Tr.). 44. About June 13 (before Hodes or Gray had bought any Champion stock), Russ called Hodes, whom he had known from Russ’s days at Thomson-McKinnon (which had been the underwriter when they both worked on the Champion underwriting referred to in Finding 43). Russ asked Hodes’ assistance in reaching Charles Schwartz (“Schwartz”), then Champion’s President (now its Board Chairman) and then and now its Chief Executive Officer (Hodes Tr.; Russ 17-18; PX 13). Hodes told Russ he and his client, Gray, were contemplating taking a large position “with an eye toward effecting a change of control” (PX 13). Hodes therefore declined to call Schwartz on Russ’ behalf (Hodes Tr.). 45. Hodes did, however, put Gray in touch with Russ. In mid-June Russ arranged for Hodes and Gray to talk with Russ client Silverstein. Hodes and Gray traveled to New York City to meet with Silverstein, Russ and O’Neil (Hodes Tr.). Silverstein would only engage in a friendly deal — he “likes to make himself known to the management ... to see if he can work with management somehow” (PX 13 at 2; Russ 19-20). He did not want to join Hodes and Gray because, although they had “similar ideas as to value ... they did not agree about tactics” — referring to Silverstein’s lack of interest in getting involved in the hostile takeover Gray contemplated attempting (PX 13; Gray 29-33). Hodes never revealed that takeover intention in any Schedule 13D (PX 9-12). 46. As reflected in earlier findings, Russ had already formulated, and communicated to Gray and Hodes, the predicates for a hoped-for Champion takeover (Gray 37-39). Gray spoke with Oppenheimer personnel (Russ and Metz) about the assertedly excess real estate and was told that there existed a “$19 value on the assets of the Company” (Gray 77). Russ told Gray Oppenheimer had obtained at least one appraisal (formal or informal) of Champion’s Texas real estate (Gray 78). Hodes made notes on a page from Champion’s 10-K concerning projected values of Champion’s real estate, derived from either Russ or Gray (PX 40; Hodes Tr.). 47. On or about June 17 Hodes (who had not previously been an Oppenheimer customer, O’Neil 32) began purchasing Champion shares through Russ (Russ 17). At about that time Russ sent Hodes and Gray the memorandum he had prepared in May for Silverstein, memorializing Russ’s and Metz’s opinion on the asset values of Champion and a possible leveraged buyout for Champion (PX 14, 18; Russ 73-74). 48. Hodes and Gray bought Champion shares in tandem. Each knew the other was buying (Hodes Tr.). Their purchases in June and early July clearly illustrate concerted activity (PX 9 at 8-9): Champion Shares Purchased Date By Hodes By Gray Price June 17 1,000 1.000 6-1/4 June 17 1,500 1,500 6-1/8 June 18 1,200 1,200 6-1/2 June 19 250 250 6-9/16 June 20 12,000 12,000 6-11/16 June 23 1,200 1,200 6-5/8 June 24 14,700 14,000 6-5/8 July 8 2,000 2.000 6-13/16 July 14 600 600 6-11/16 49. As an initial move toward seeking control, early in July Russ spoke with John Gross (“Gross”), a member of Champion’s founding family (see Finding 5) and now a Board member and a consultant to the company, to set up a meeting to discuss the Hodes-Gray plans to recompose the Champion board and restructure the company (Russ 124-26). Before meeting with Gross, Russ discussed the upcoming meeting and plan with his office-mate O’Neil (Russ 125). O’Neil later relayed that information to Cormier (O’Neil 123). 50. On July 8 Russ flew to Chicago and met with Gross (Russ 123), his trip expenses being paid for by Hodes and Gray (PX 13, 19; Hodes Tr.). At the meeting Russ suggested different deals that could be struck between Hodes-Gray and John Gross (Russ 124). 51. On the night before that meeting, Russ had dinner in Chicago with Gray and told him Russ expected to receive compensation beyond brokerage commissions for his work (Gray 45-49). Gray was agreeable to some kind of extra financial arrangement for Russ (Gray 65-66). In fact, in mid-June Gray had suggested Russ become a financial consultant to Champion, an arrangement in which Russ was interested (Russ 144-45). 52. On July 14 (after the meeting with Gross) Russ sent a letter to Gray to memorialize their oral understandings. In part Russ said (PX 19, emphasis added): Secondly, I would like to confirm the second portion of our conversation. Specifically, I am referring to the oral understanding you and I discussed concerning my ability to optain [sic] an option on 2% of the stock of Champion Parts, up to a maximum of 10,000 shares. As we discussed, the option would be exercisable at $7.00 per share. Clearly this option is only awardable if (a) you and your group gain operating control of Champion Parts (b) you and your group initiate action which leads Champion Parts to seek another group to gain control. J. Hodes’ 1934 Act § 13(d) Violations 53. By July 15 Hodes and Gray together owned 7.3% (138,750 shares) of Champion’s stock (indeed, Gray’s holdings alone then exceeded 5%). They disclosed their 5 + % interest in a Schedule 13D prepared by Hodes and one of his law partners and filed July 24, 1986 (PX 9). 54. At about the time of that first filing, Hodes sent Gray a chapter from a legal treatise captioned “Securities and Exchange Commission Problems — Takeover Bids” (PX 39). Hodes told Gray, “I think you should read it, Sheldon” (Hodes Tr.). 55. From the outset, Gray admittedly had a “program” “to take a major role in [Champion]” (Gray 193). That “major role” plainly involved a proposed takeover effort. In that respect Gray confirmed “I made my intentions very clear to Russ” (Gray 193). Hodes’ ambitions may have been less grandiose than Gray’s, but he certainly shared Gray’s intent to be more than a passive investor — to acquire Board representation if feasible — and he was surely aware of Gray’s intentions. Despite that, the Gray-Hodes Schedule 13D dissembled as to those matters, thus concealing them from other Champion shareholders and the investing public. All the Schedule 13D said was that they intended to hold the shares “for investment purposes” (PX 9), yet there is no question Gray (and most likely Hodes as well) had clearly defined plans to take over Champion and influence its management. 56. In the Hodes-Gray July 24 Schedule 13D, Hodes (both as a principal and as a lawyer-preparer) failed to disclose: (a) their active present intent to join the Champion Board of Directors and either take over the company or assert an active role in its management; and (b) in pursuance of that intent, their continuing negotiations with Gross (a Champion director and consultant) to join their group, and the fact they had spoken with him about the possibility of joining together to call a special shareholders’ meeting. Those nondisclosures were material items in terms of the investment decisions of other shareholders (see Finding 42). All subsequent acquisitions of Champion stock by Hodes were tainted by such nondisclosure. K. Further 193% Act § 13(d) Violations by Defendants Other Than Hodes 57. Just as Russ negotiated for an option or consulting agreement with the Gray-Hodes group (see Findings 51-52), like discussions were undertaken with the Cormier-Navon-RRH group. O’Neil and Russ discussed with Robinson a similar arrangement for an “amount of options” or an equity stake in Champion once it was taken over (Russ 148-49). In addition, Robinson suggested to O’Neil that he go out to Chicago as a representative of the investors (O’Neil 171). O’Neil declined, but suggested Russ for the job (O’Neil 172). Russ was to be “a watchdog for the investors” (Russ 146). 58. Both Robinson and Cormier contemplated the Oppenheimer brokers would be involved after Champion was taken over. Robinson told O’Neil he wanted someone to go out to Chicago and “babysit” his investment, to “find out what is going on inside” Champion (O’Neil 172). Cormier wanted Russ to act as “eyes and ears” for Cormier and Robinson (Gray 177). Russ was to take an untitled position as a financial consultant first, an arrangement that could escalate into his becoming “a chairman of the board type of figure” (O’Neil 172; Russ 146). 59. Those arrangements with Russ and O’Neil (to take effect post-takeover) were discussed among the participants long before any takeover plans were disclosed. As early as mid-August, Cormier and O’Neil discussed bringing Russ over to Champion to “look into the four points” leading to the sale of Champion, “after terminating at Oppenheimer” (Cormier 57-58). Russ understood he was to receive $11,000 per month for those services in addition to “other compensation” in the form of options for the shares of Champion (Russ 147-48). 60. Nothing about those proposed arrangements was disclosed in the relevant Schedule 13D filings by Cormier and his group. Some information in that respect was finally confirmed (but not adequately disclosed) months later in a November 25 Schedule 13D amendment, which referred obliquely and misleadingly to Champion “retaining an independent financial consultant” (PX 12). By contrast, just four weeks later Cormier-Navon Defendants’ Trial Mem. 8 admitted Cormier’s “principal belief was that Russ, an outsider familiar with the industry, should go on the payroll at Champion to look into these issues____” L. Post-Initial-Violation Events: August-September 1986 61. On August 6 a short article about Standard Motor Products appeared in the New York Times. Standard Motor had recently purchased a division of a company in a line of business similar to Champion’s (O’Neil 107). O'Neil clipped the article and wrote on the bottom of the page, “if Champion were sold in a private transaction at the same multiple, we would get $30 per share” (PX 20; O’Neil 107). O'Neil promptly sent copies of the article — with the handwritten reference to what “we” would receive upon sale of Champion — to all his clients (O'Neil 101; PX 20). 62. O’Neil called Cormier with the same message the same day the article came out (O’Neil 110). Cormier understood O'Neil’s reference to a “private transaction” to mean “selling the entire company to somebody” (Cormier 95). Cormier and O’Neil again discussed their plans (see Findings 23-25) to “increase” Champion’s book value, leading to the sale of Champion in approximately two years (Cormier 83-84, 98). 63. Throughout the summer of 1986 Russ was also discussing the sale of Champion with his client, Gray. Russ solicited Gray’s suggestions as to possible acquirers (Gray 121-23). Russ told Gray that, based on the Standard Motor transaction, he believed Champion could be sold for $75 million (Gray 103-05), as contrasted with its then total market valuation of less than $20 million. 64. In August or early September O'Neil and Russ set up a meeting at the office of RRH (Russ 130; O’Neil 124-26), attended by Hodes, Gray, Robinson, Russ and O’Neil (Gray 133). Cormier (though invited) did not attend the meeting, but O’Neil promptly reported to him what took place (Cormier 213). It was at this meeting that O’Neil informed the participants Cormier’s attendance was not necessary because “Mr. Robinson controlled Mr. Cormier” (but see Finding 31) (Gray 133). At the meeting Gray told Robinson he wanted to “take over” Champion (O’Neil 70, 128). 65. Shortly thereafter Russ prepared a detailed five-page memorandum (PX 21) “relating to the substance of the meeting” (O’Neil 127; Russ 134). Though captioned “Management Reorganization and Corporate Strategy,” the memorandum was really a takeover blueprint: Management Reorganization and Corporate Strategy I. Management Reorganization A. 13-D Holders call for Special Shareholders Meeting 1. Groups calling for special shareholders meeting a. Hodes-Gray 8% b. Robinson 5% c. Cormier 10% d. Gross 12% 2. Proceed to arrange for meeting a. obtain shareholders list b. go to court to force meeting if necessary 1. 13D groups excluding Gross meet to arrange cost sharing if and when a fight breaks out 3. Upon presentation of demand for shareholders meeting, try to get Schwartz to peacefully agree to reorganize management i.e. have directors resign to be replaced by 13D nominees B. Should Schwartz not immediately agree to a change 1. Initiate proxy fight 13D groups meet to agree on a full slate of directors C. The Proxy battle 1. Nominees for reorganized board should include following characteristics a. stock ownership in size b. broad range of business disciplines c. automotive experience 2. areas of weakness for 13D groups proxy battle a. Sheldon Gray-bankruptcy D. Assuming Victory 1. Board reform so that nominees of 13D groups replace principals of 13D groups 2. the 13D groups agree upon working nominees who will be responsible for implementing a corporate strategy to attain asset value 3. active board — for at least one year after victory have monthly board meetings. 66. Whether prepared in mid-August or September, the memorandum shows the “Cormier” holdings at 10%, reflecting the reality (with which these Findings are consistent) that the Cormier-Navon holdings should be treated as one. There was no Schedule 13D disclosure of that fact to anyone outside the group until October 2 (PX 2), though the Cormier-Navon holdings alone (even without the RRH holdings) crossed the Section 13(d) 5% filing threshold August 7. 67. Immediately after the meeting in Robinson’s office, Hodes, Gray and Russ went to Oppenheimer headquarters and met with Metz and Weinger (Gray 138-40). Metz told them (Gray 140): (a) He would remain in the investment as long as it “looked like everything was going to escalate.” (b) He thought it was interesting that the group was “making a play,” and wished everyone well. 68. At dinner that evening O’Neil recommended to Hodes, Gray and Russ that they quickly “move on” Champion and its management to take control (Gray 144-45). Gray was concerned the timing could injure Champion by placing it “under siege” at the time of the annual convention of the Automotive Warehouse Distributors Association, the most important annual industrywide gathering (Gray 145-47). That potential problem did not trouble O’Neil, who “was going to do what he was going to do irregardless [sic] of the consequences” (Gray 147). 69. In August Cormier completed his “final evaluation” of the already-discussed takeover plan (Cormier Tr.). Cormier also dramatically increased his orders for Champion shares: As contrasted with his previous limitation on his orders with O’Neil to 10,000 shares each, Cormier now increased his total buy order to 100,000 shares — the aggregate amount of money he and his immediate family group had available (Cormier 154-55). As Cormier put it, “I just told [O’Neil] that whenever — that if and when the stock became available to buy it” (Cormier 155). 70. Cormier encouraged various employees, relatives and acquaintances (his “puppies,” see n. 18) to buy Champion stock (Cormier Tr.; Cormier 200-06). Cormier told his “puppies” they could make money in the stock, and others — such as Morris — were also aggressively purchasing Champion shares (Nadeau 24-27). When asked if he could “recommend” Champion shares, Cormier replied he “felt very confident” (Cormier 190). He also told at least some of his “puppies” about the impending change in control at Champion (Nadeau 42). 71. Cormier “recommend[ed]” that his employees, relatives and friends purchase Champion shares until, by late October, some 23 such individuals and entities had acquired 87,000 shares (PX 23). Cormier had “no doubt in [his] mind” that all of his “puppies” would “vote” for him and support him in the plans he had for Champion (Cormier Tr.; Cormier 34, 36). As Cormier stated with respect to his “puppies”: “the local people ... would be behind me” (Cormier 165). Despite his certainty that he could count on their votes — he was not, he testified, “running a bluff” (Cormier Tr.) — Cormier has never filed a Schedule 13D including them as part of his group, nor has he ever disclosed the fact of their “certain” support, even in the post-Hearing Schedule 13D filed January 9, 1987. 72. At least one of the “puppies,” Pauline Eastman, a life-long friend of the Cormiers and the real estate broker for whom Cormier’s wife works as a salesperson (P. Eastman 17-18), was introduced to O’Neil by Cormier (Cormier 129). Eastman and her son then bought over 16,000 shares of Champion through O’Neil (Cormier 130; P. Eastman 57-58). At all times Cormier assumed the Eastmans, as well as the other “puppies,” would support him (Cormier 165-70). Roland Nadeau said he considered himself to be part of Cormier and Navon’s group, and he had given Cormier the right to vote his stock (Nadeau 60-62). Nadeau reacted enthusiastically to the prospect of a Cormier-led takeover (Nadeau 30). 73. Cormier kept his “puppies” generally advised as to Champion, sending them newspaper articles and clippings about the company (Cormier Tr.; Cormier 131). For example, an October 1 Chicago Tribune article about Champion was rapifaxed from Hodes to Russ, who gave it to O’Neil, who mailed it to Cormier, who gave it to Pauline Eastman, a Cormier “puppy” (Cormier 134; P. Eastman 43-56; PX 25). 74. Cormier periodically communicated with his “puppies” and asked about the extent of their stockholdings (the reasonable inference is he did so to monitor just how much stock he controlled through the “puppies”). That information was provided to him before October 23 (Nadeau 37). 75. By contrast, in dealing with Champion Cormier played his cards close to the vest (continuing his failure to make public disclosure). He made no response whatever to Schwartz’s August 6 letter to Cormier Corporation welcoming it as a shareholder and offering to answer questions or to provide additional information (Schwartz Tr.; PX 31). When Schwartz finally talked with Cormier in late September (after repeated attempts to reach him), Cormier said only he had purchased his Champion shares for “investment purposes.” He did not mention any aspect of his true intentions or any of the other members of the group (the Navons or RRH) or the “puppies” (Schwartz Tr.). On October 2, Schwartz sent Cormier another letter suggesting a meeting and offering to provide additional information on the company (PX 32). Similarly, after the Navon Defendants were finally added to the Cormier Schedule 13D (PX 2), Schwartz sent Herman an October 7 letter enclosing information on the company, welcoming him as a shareholder and offering to meet, sending a copy of the letter to Cormier (Schwartz Tr.; PX 33). Schwartz never received a response (Schwartz Tr.). 76. Meanwhile Hodes and Gray continued to buy Champion shares through Russ. In addition, at some time after his July 8 meeting with Gross, Russ identified Hodes and Gray as his clients to Gross. Hodes and Gray later met with Gross to solicit his support for their plans (Hodes Tr.; Hodes 97), and Hodes drafted a proxy for signature by members of the Gross family (Hodes Tr.). Hodes, a skilled practitioner in corporate and securities law, knew adding the Gross family shares would give the Hodes-Gray group more than 20% — enough shares, under Illinois law, to call a special shareholders’ meeting and (with cumulative voting) to elect at least two directors to the Champion Board (Hodes Tr.). 77. Hodes and Gray met with Schwartz, Champion’s chief executive, on August 5 at a restaurant in Chicago. Gray had prepared three pages of plans and options for Champion (PX 56), listing respectively: (a) a ten-point plan for the company, including installing a new chief operating officer; (b) eight separate questions for the lunch meeting with Schwartz, including restructuring the Board of Directors, naming Gray as Vice Chairman of the Board, and selling the company at book value or higher; and (c) two options: one if Schwartz stayed with the company (presumably after a change in control), and one (including replacement of the board) if Schwartz left. According to Hodes, those were Gray’s ideas (Hodes Tr.). Some were discussed at the meeting (Hodes Tr.), but none was ever disclosed on any Hodes-Gray Schedule 13D. Gray gave Hodes all three pages of PX 56, though perhaps not as a group (Hodes said he received the second page on August 5 at the lunch meeting) (Hodes Tr.). 78. Consistently with Findings 55-56 as to the intention of Hodes and Gray to acquire seats on the Champion Board, they specifically requested such seats at their August 5 lunch with Schwartz (Hodes Tr.). Again Hodes and Gray at no time disclosed the fact of their seeking board representation in any Schedule 13D. 79. Later, in preparation for the Robinson-office meeting (see Finding 64), Gray wrote a letter to Hodes dated August 29, 1986, listing a compensation program for a new president and chief executive officer, “worked out” by Gray “with the help of candidates for President and C.O.O.” (PX 41). That letter reflects a clear intention to replace Champion’s top management. Hodes claimed (a) he was unaware of Gray’s actions (active solicitation of candidates for management positions) until the day he saw the letter and (b) he disagreed with Gray and told him not to mention the subject in the meeting with Robinson, but Hodes acknowledged Gray did raise the subject of board representation with Robinson at that meeting (Hodes Tr.). 80. As was true of the initial GrayHodes Schedule 13D, Hodes and his law partner Sidney Sosin drafted all the Schedules 13D later filed by Hodes and Gray (and still later by Hodes, Gray and John Gross) (Hodes Tr.; PX 9,10,11,12). At all those times (irrespective of his alleged agreement or nonagreement with Gray) Hodes was fully aware of Gray’s intentions and plans as to taking control, reconstituting the Board of Directors and replacing Champion's top management. Yet those intentions and plans were never disclosed in any Schedule 13D. M. Post-Initial-Violation Events: More as to Defendants’ Board-Representation Intentions 81. During the late summer O’Neil and Russ became actively involved in the planning of various defendants for board representation. In August O’Neil called Hodes for advice on calling special shareholder meetings under Illinois law (Hodes Tr.). Hodes transferred O’Neil to his partner Sosin, and Sosin prepared an Agreement and Proxy calling for Hodes, Gray and O’Neil to be placed on the Champion Board at a special meeting once Schwartz and six other board members were removed (PX 22). Sosin left blank spaces to list other new board members (presumably four). Sosin gave Hodes a copy and sent the materials to O’Neil by Federal Express August 20 (Hodes Tr.; PX 22). O’Neil thought the idea sounded “interesting” (O’Neil 161). 82. Some time in mid-September O’Neil told Russ that Robinson wanted Russ to serve on the Board (Russ 140). During that conversation O’Neil mentioned other candidates for the new board included Cormier, a Navon representative and Roy Whitney (“Whitney”) (Russ 141). Whitney is a client of Russ’ and a partner in Hammond & Kennedy, “which is a merger and acquisition leveraged buyout financial intermediary firm” (Russ 141). 83. After Robinson filed his initial (October 1) Schedule 13D, Robinson told O’Neil he thought it “would be a good idea” for O’Neil to be on the Board and said “he didn’t see why [O'Neil] couldn’t represent his stock on the board” (O’Neil 163). Cormier also authorized O'Neil to seek a seat on the Board “in our behalf, in the family’s behalf in the investment we had” (Cormier 236). 84. Also in October, Cormier talked with Thomas Healy, one of his business associates and “puppies” (PX 23), about Healy’s possible service on the Champion Board (Cormier Tr.). After this Court commented on that admission at the close of Cormier’s cross-examination and after Cormier’s counsel had waived any redirect examination, his counsel recalled Cormier for the sole purpose of allowing Cormier to retract all his testimony about Healy’s Board membership. Cormier offered no explanation for his altered recollection (Cormier Tr.). 85. O’Neil also discussed his potential election to the Board with several of his clients, including Herman and at least three others with whom he had been parking Champion shares (O’Neil 164). Yet throughout the entire August-September period, while defendants were parceling out the slots on the Board they anticipated they would control, Champion shareholders and the investing public had no accurate idea from defendants’ Schedule 13D filings of either (a) the number of Champion shares defendants actually controlled (a material misrepresentation) or (b) their plans for Champion (a material omission) (PX 1-3, PX 6-7, PX 9-11). 86. Meanwhile O’Neil, Russ and Robinson had felt concerned enough about their role in the emerging takeover to consult a lawyer. At Russ’ suggestion they retained Henry Cortesi (“Cortesi”), a partner in the New York firm of Webster & Sheffield (O’Neil 138-39, 146-48; Robinson 141-43). 87. O’Neil, Russ and Robinson had attended a meeting concerning Champion in Cortesi’s office (O’Neil 139; Russ 195-96, 198-201, 203-04; Robinson 140-41). Cormier knew O’Neil and Russ had consulted counsel. Indeed, he agreed with Robinson to split the legal fees, just as he had shared legal fees and expenses with Robinson in connection with the United Federal Savings Bank merger fight (Cormier Tr.). As with other aspects of his testimony, Cormier tried to downplay the obvious fact of his linkage with Robinson, instead saying Cortesi was representing him in connection with Champion by advising O’Neil and Russ on “how to keep from stepping on land mines” (Cormier Tr.). 88. Cortesi also acted directly on behalf of Cormier and Robinson. He drafted a proposed amendment to the Cormier 13D, adding RRH as a member of the group, and sent it to Cormier on October 16 along with a proposed engagement letter (DX 4; PX 58). Although Cormier would not sign the engagement letter, he used the text of the draft amendment, agreed to share in paying Cortesi’s fees and repeatedly called on Cortesi for legal counsel during October and November (Cormier Tr.). N. October 23 Meeting and Its Aftermath 89. At Schwartz’s suggestion, on October 22 he met with Robinson in New York. Robinson did not mention defendants’ takeover plans, despite the fact that they were now so specific as to include discussion of what persons were to go on the Champion Board (Schwartz Tr.). 90. Schwartz had also attempted to arrange a meeting with Cormier in New Hampshire, but Cormier explained he could not meet because he had plans to visit Hodes in Chicago. Cormier agreed to meet with Schwartz in Chicago October 23, after his meeting with Hodes. Once again Cormier made no mention of his group’s by-now-crystallized takeover plans (Schwartz Tr.). 91. After his October 22 meeting with Robinson in New York, Schwartz called O’Neil to see if they could meet. O’Neil said he didn’t have time that day (Schwartz Tr.). In fact, O’Neil was preparing to travel to Chicago to help Cormier present — and if possible execute — the Cormier-NavonRRH group’s takeover plans. 92. On the afternoon of October 23, Cormier and O’Neil appeared at Champion headquarters and announced to Schwartz their group controlled the votes of 42% of Champion’s shares (Cormier Tr.; Schwartz Tr.; Savini Tr.; Cormier 164-65). Cormier demanded the resignation of all ten members of the Champion Board, to be replaced by him and other members of his group. He also revealed the plan to restructure Champion based upon the now-refined elements of the initial “four point” takeover plans (Cormier Tr.; Schwartz Tr.; Savini Tr.; Cormier 254-55). At that point Cormier’s announced plans — paralleling the essential goals intended from the very outset of his group’s purchases, though with some refinements as to the particular means for implementing these goals — were to: (a) sell the “undervalued” real estate to the major stockholders; (b) cut back the inventory; (c) factor the accounts receivable; and (d) broaden the marketing base. Finally, in a direct tracking of the group’s ultimate intention from the very beginning, Cormier said Champion should then be sold (through Oppenheimer) within two years for $24 per share (Cormier Tr.; Schwartz Tr.; Savini Tr.). Cormier’s announced intentions, first disclosed to Champion October 23, were finally referred to in an amendment to Cormier’s Schedule 13D filed over a month later (November 25) (PX 5; Cormier 255). 93. Cormier and O’Neil told Schwartz that the 42% was calculated by adding (a) the shares held by the Cormier-Navon-RRH 13D filing group, (b) the Cormier and Navon “puppies’ ” shares and (c) the shares that had been parked in the various Oppenheimer accounts by defendants’ broker-agents (Cormier Tr.; Schwartz Tr.; Russ 167; Cormier 173, 175; PX 34). On that basis Cormier and his broker, O’Neil, claimed “working control” of Champion (Cormier Tr.; Schwartz Tr.). 94. Cormier testified he and O’Neil first realized their group controlled Champion when they tallied up the shares on O’Neil’s pocket calculator in a waiting lounge at O’Hare Airport October 23, before meeting Gray and driving downtown for a preliminary meeting in Hodes’ office (Cormier Tr.). As of October 23 Cormier himself owned 153,850 shares, representing an investment of approximately $1 million (PX 1, 2). O’Neil, who kept careful records of his Champion sales (PX 15), had then sold hundreds of thousands of Champion shares. As with Cormier’s “guesstimate” concoction (see n. 42), Cormier’s entire assertion of his and O’Neil’s first having become aware of “working control” of Champion October 23 is equally unbelievable and is also rejected. 95. Cormier and O’Neil returned to Champion October 24. They provided more details on the shareholdings that made up the 42%, and they announced Champion should hire Russ as a financial consultant to evaluate and implement the Cormier-announced plan (Cormier Tr.; Schwartz Tr.). Schwartz made notes of some of the claimed shareholdings, including shares controlled by Metz and Russ and shares held by “Odie’s friends” (Schwartz Tr.; PX 34). When the discussion turned to the manner in which new directors might be elected, Cormier and O’Neil telephoned “their lawyer” Cortesi for advice (Schwartz Tr.; Cormier Tr.). On the same day Champion issued a press release announcing Cormier’s claim of “the support of a considerably larger number of shares, [than those reflected in defendants’ Schedules 13d]” and his request for “Board representation reflecting [his group’s] ownership interest” (PX 35). 96. Cormier’s October 23 announcement of control flatly contradicted the previously-filed Schedules 13D. Champion’s counsel therefore asked for confirmation of the claim of working control. Russ and O’Neil began to solicit letters from their clients confirming support for the Cormier group, expecting the Board to resign and turn control over to them. 97. Acting as the “appointed representative” for Cormier and Robinson (Gray 154), O’Neil asked Cortesi (the attorney representing the group, O’Neil 194) to provide him with the text of a letter shareholders could write to establish their support for the group and its plans (O’Neil 194,197; Russ 177). O’Neil then took the form letter and dictated it over the telephone to his clients, who sent it back to O’Neil on their own stationery (O’Neil 197-98; Dusoe 27; PX 26). O’Neil’s clients, such as Leon Dusoe, a New Ha