Reference no: EM133006143

Rattell, Inc. is a toy manufacturer specializing in games for girls and boys aged eight to twelve. On June 30, Rattell predicted first-quarter earnings of $0.15 per share. On July 15, Rattell received a fax from its key distributor reporting a $5 million claim for personal injury of an eleven-year-old child who was allegedly injured by a design defect in Rattell's most popular product line, the Amity Spartans. Rattell's outside counsel was instructed to prepare a press release describing the claim. Before the press release was sent to the copy center at Rattell's executive office, the vice president of sales, one director, and the outside counsel sold all of their Rattell shares at the prevailing market price of $25.25 per share.

• Carol Copier, who ran the photocopying machine at Rattell's executive office, saw the draft press release. She called her stock broker, Bruce Broker, told him about the press release, and ordered him to sell the 500 shares of Rattell that she had acquired in Rattell's initial public offering. Broker then called his best client, Charles Client, and suggested that he sell his 100,000 shares of Rattell but did not tell him why. Client agreed, and Broker sold Copier's and Client's stock at $25.25 a share right before the market closed on July 17.

Problem 1: How would financial liability be calculated?