BEAUMONT, Texas (CN) – A securities lawyer misled his brother into going public with a jewelry business that eventually went bankrupt, the Texas Court of Appeal ruled.
Greg Gordon claimed his brother David would advise him on when he could sell his stock to avoid insider-trading charges.
Con-Tex Silver Imports went public after Greg and his wife Lisa built it into a business worth $1 million. After Con-Tex went public, the SEC investigated the corporation that David had merged Con-Tex into, and the merged company went bankrupt.
The district court had ruled that no fiduciary relationship existed between the brothers, but Judge Horton disagreed because David was continually advising Greg on when he could legally sell his stock.
Since David held the stock for his brother and prevented his brother from selling, Horton ruled that Greg was misled by David’s negligent actions.
“Despite the expiration of the holding period required by SEC regulations and Greg and Lisa’s growing frustration,” Horton wrote, “David continued to advise Greg and Lisa that they were legally prohibited from selling or otherwise trading their shares of stock.”