National Student Marketing Corporation (NSMC) (defendant), which marketed products for high school and college students, entered into negotiations to acquire Interstate National Corporation (Interstate) (defendant), an insurance holding company. NSMC provided Interstate with a nine-month financial statement showing a profit for NSMC. The two companies agreed that an opinion letter would be provided by each party’s law firm as well as a “comfort letter” from an independent public accountant. The law firm of White & Case (defendant) represented NSMC and the firm Lord Bissell & Brook (LBB) (defendant) represented Interstate. The accounting firm Peat Marwick concluded in the comfort letter that NSMC’s nine-month financial statement required adjustment, after which it would show the company suffered a financial loss. However, no effort was made by any party to disclose the contents of NSMC’s comfort letter to shareholders or to the public. After the merger of the two companies the stock rose dramatically and then dropped sharply after word leaked that the merged company had falsified its financial position. Thereafter, the Securities and Exchange Commission (SEC) (plaintiff) filed a civil enforcement action seeking injunctive relief against NSMC, Interstate, the two law firms, Peat Marwick, and several corporate officers (collectively, defendants) for violations of several securities laws.