Billionaire Mark Cuban takes on the SEC

Correction: This story has been updated to correct the name of a Fox channel. It’s Fox Business Network, not Fox Business News.


Mark Cuban, billionaire owner of the Dallas Mavericks basketball team laughs while speaking to the media outside federal court in Dallas, Oct. 16. Cuban didn't engage in insider trading nine years ago, a federal jury decided in a case brought by the SEC. (Mike Fuentes/Bloomberg)
November 20, 2013

Entrepreneurs pull all kinds of stunts to get an audience with billionaire investor Mark Cuban on the reality television show “Shark Tank.”

Now, Cuban is trying to get an audience before Mary Jo White, chairman of the Securities and Exchange Commission, and it’s unlikely he’ll even get his foot in the door.

The effort marks the latest twist in a saga that began in 2008, when the SEC accused Cuban of trading on non-public information when he sold his stake in a Canadian firm. Cuban balked at the allegations, refused to settle and claimed that the SEC targeted him because he’s famous. A federal jury cleared Cuban of the charges last month.

But the owner of the NBA’s Dallas Mavericks won’t let it rest. Cuban, who has racked up $1.89 million in fines for his sideline outbursts, is expert at goading his adversaries. Never one to hold his tongue, he’s been using his blog, Twitter and the news media to beat up on the SEC for its handling of the case. The public showdown pits the eccentric billionaire against a buttoned-down agency that has been taken aback by the unusually acrimonious and personal nature of the attacks.

For the SEC, going after a celebrity has a high payoff — if it wins. Unlike cases tried out of the spotlight, the verdict in a well-publicized case typically reaches beyond the defendants, creating a deterrent by showing that no one is above the law, agency officials say. That said, as Cuban has demonstrated, a loss can pose a public relations nightmare.

Cuban said he is trying to get a face-to-face meeting with White and hopes to discuss how his ordeal can inform the SEC’s work. He said the agency measures success by its courtroom wins and losses without assessing whether these legal battles boost investor confidence or improve market fairness.

“I’d like to just sit down with her,” Cuban told The Washington Post. “They are trying to make the markets fair, but they just don’t know how to get there.”

Rarely, if ever, does an SEC chief meet with a defendant after a trial, and White is not about to break with tradition, according to a person familiar with the agency’s thinking who is not authorized to speak publicly about the matter. The person said the agency has not received a request for a meeting.

In post-trial interviews, Cuban has bashed the SEC for eating up years of his life, and plenty of his cash, in an effort to find him liable on bogus charges. He says he rebuffed a $2 million settlement and paid $12 million in legal fees to defend himself.

Immediately after the jury reached its verdict, he appeared on the courthouse steps in Dallas, flanked by his legal team, and said the SEC had lied.

The blitz continued on Fox Business Network, CNBC and “The Tonight Show With Jay Leno.” In an interview published this week by USA Today, Cuban suggested that the SEC may have charged him to divert attention from the arrest soon thereafter of Bernard Madoff, whose Ponzi scheme went undetected by the SEC for years, damaging its reputation.

Cuban said he wants to hold the SEC attorneys accountable for his ordeal, which is why he’s naming names and focusing on not just the appointed head of the agency, but the career lawyers who faced off against him in court. On “Leno,” he said there were good people at the SEC, but not Jan Folena, the agency’s lead attorney in his case. “F-O-L-E-N-A,” he told the audience. Linda Thomsen, the SEC’s enforcement chief at the time, may have targeted him because “she was just desperate for a skin on the wall,” he told USA Today.

Thomsen, now in private practice, did not respond to calls requesting a comment. Folena declined to comment for this article.

Immediately after the jury’s verdict, the SEC said Cuban’s remarks were “without merit and uncalled for.” The agency’s legal team “acted in the finest traditions of government counsel and entirely appropriately,” George Canellos, the SEC’s co-director of enforcement, said in a statement.

But the agency has been mum since.

Legal experts said the SEC has to hold back. Short of filing an appeal, which is unlikely in this case, it would be unseemly for the agency to engage in a tit-for-tat with Cuban or question the jury’s decision, they said.

“When the jury renders a verdict, that’s the definitive last word,” said Thomas Sporkin, a former SEC enforcement official who is now a lawyer at BuckleySandler. “There’s no longer an official forum in which they can respond. As regulators, they have to be careful about stepping outside the box and losing their air of credibility.”

Others say Cuban is misguided in taking on specific attorneys.

“Jan Folena is not the policymaker,” said Bradley J. Bondi, a former counsel to two SEC commissioners and now a lawyer at Cadwalader, Wickersham & Taft. “She did not decide to pursue this case. She was asked to try the case by her supervisors in the trial unit, and the trial unit was directed to try this case by the commission.”

A 2011 report by the SEC’s inspector general found that Cuban’s celebrity status did not play a role in the decision to pursue the case and, in fact, some lawyers initially involved did not know who Cuban was. But even if they did, that alone is no reason to bring a case or drop it, said Harvey Pitt, a former SEC chairman.

“It would be a hideous proposition if the fact that you’re wealthy or famous gave you a pass from being held accountable for trades that appear to violate the law,” Pitt said. “I think a lot of this is really more emotional than anything else.”

Dina ElBoghdady covers housing policy for The Washington Post.
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