SEC to Press Forward on Case Against Mark Cuban
Wednesday, October 7, 2009; 6:40 PM
The Securities and Exchange Commission is pressing forward with its high-profile case against Dallas Mavericks owner Mark Cuban after a federal court dismissed charges that he committed insider trading.
The agency filed papers on Wednesday signaling that it will appeal the judge's decision, setting the stage for a continued battle with Cuban, who has pilloried the SEC with the same force that he has heckled opponents at basketball games.
The SEC has not shied away from confrontation with the billionaire even after the case took a bizarre turn -- an SEC lawyer unaffiliated with the case sent e-mails to Cuban accusing him of being greedy and "Anti-American."
The agency alleges that Cuban avoided $750,000 in losses by trading in 2004 based on confidential information about the Internet company Mamma.com. An SEC spokesman on Wednesday said the agency continued to believe in its case.
Cuban's lawyer disagreed. "This appeal is nothing more than the SEC's desperate attempt to shock a heartbeat into a case that was dead on arrival," Stephen Best said.
The SEC alleged that in June 2004, Cuban received a confidential briefing from the chief executive of Mamma.com, a search site, about a plan to sell additional shares at a below-market price. The plan would dilute the value of existing shares, of which Cuban owned 600,000. After learning of the plan, Cuban quickly dumped his investment.
Mamma.com -- now known as Copernic -- went forward with the offering. The stock declined. The SEC claimed Cuban avoided losses. Cuban's defense was that he had no legal responsibility to refrain from trading on the information and had never agreed to do so.
Judge Sidney A. Fitzwater, a federal judge in Dallas, dismissed the case in July, saying that the SEC had not proved that Cuban had a legal responsibility not to trade based on the information.
SEC lawyers filed its notice of appeal in the federal appeals court in New Orleans, which is expected to take up the case in late November. The agency is likely to argue it didn't even have the opportunity to prove that Cuban had a duty not to trade on the information. It is also likely to argue that Cuban did have such a duty. If the appeals court decides to reinstate the case, it would return to court for a full trial.
In the past, Cuban, who sold an Internet company to Yahoo in 1999 for billions of dollars, has gotten into trouble in pro basketball, getting fined more than $1 million by the National Basketball Association for booing and cursing players.
During the course of the SEC case, Cuban routinely attacked the SEC and its approach to the matter.
The clash between the SEC and Cuban grew stranger with the release of e-mails between Cuban and Jeffrey Norris, a trial lawyer in the SEC's Fort Worth office. Cuban and Norris engaged in an acrimonious e-mail exchange about a movie studio co-owned by Cuban that considered distributing a film suggesting that the U.S. government had a role in the Sept. 11 terrorist attacks.