Was Mitchell’s lie about having a college degree material? If you had been a mem

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In 1998, after working at two banks for about ten years,
Bryan J. Mitchell helped found MCG Capital Corporation, a venture-capital firm
that invested in the media, communications, and technology sectors. MCG went
public in 2001, and Mitchell served as its CEO and chair of the board. Various
documents filed with the SEC stated that Mitchell “earned a B.A. in economics
from Syracuse University.” In fact, he attended Syracuse for only three years
and did not graduate. After being pressured by a journalist, Mitchell disclosed
the misrepresentation to the MCG board. The same day, the company issued a
press release correcting the statement. The board subsequently stripped
Mitchell of his title as chair of the board and made him repay certain bonuses
and loans.

The press responded negatively to “another CEO that lied
about his résumé” and speculated about “what else might not be right.” On the
day the press release was issued, MCG’s stock price dropped from $11.85 per
share to $8.40 but fully recovered within a month.

Shareholders sued, alleging that the misrepresentation
violated Section 11 of the 1933 Act, Section 10(b) of the 1934 Act, and Rule
10b–5. Was Mitchell’s lie about having a college degree material? If you had
been a member of the MCG board, would you have been comfortable keeping
Mitchell as CEO? [Greenhouse v. MCG Capital Corp., 392 F.3d 650 (4th Cir.
2004).]