A federal jury took only about three hours Wednesday to clear Dallas billionaire Mark Cuban of insider trading charges, undermining a push by the Securities and Exchange Commission to establish a solid record of high-profile courtroom victories.
The decision caps a five-year legal battle that began when the SEC accused Cuban of trading on non-public information when he sold 600,000 shares in a Canadian Internet company for $7.9 million. The trade, made in 2004, enabled him to avoid a $750,000 loss.
The Dallas jury rejected all the SEC’s allegations in a civil case that was closely watched mostly because of Cuban’s enormous wealth and celebrity status. The 55-year-old is best known as the excitable owner of the Dallas Mavericks who is repeatedly fined for his sideline antics and as the shrewd investor on ABC’s reality TV show, “Shark Tank.”
Since the SEC launched its case, Cuban has accused the agency of bullying him, a message his defense team carried into the courtroom and repeated after the jury reached its verdict. Cuban, with an estimated net worth of $2.5 billion, could have settled the case.
On the courthouse steps after the jury announced its verdict, Cuban said he spent more money litigating the case than he would have paid in a fine. But he said he continued to fight because the allegations against him were “personal” and he “had nothing to hide.”
“I’m the luckiest guy in the world,” Cuban said. “I’m glad this happened to me. I’m glad I’m able to be the person who can afford to stand up to them.”
His attorney, Lyle Roberts of Cooley LLP, said the SEC did not have evidence to support its claim. “It’s always gone after him as a public figure,” he said.
Cuban did not face any jail time, but his reputation was at stake. By taking on such a well-known figure, the SEC faced its own reputational risks.
Unlike cases that are tried out of the spotlight, the verdict in a well-publicized trial reaches beyond the defendants. In recent speeches, SEC Chairman Mary Jo White has said that a strong enforcement regime is effective only if the agency can win at trial, and that taking down high-profile market players sends a strong message of deterrence.
The loss Wednesday comes on the heels of a major victory for the SEC in the case of Goldman Sachs executive Fabrice Tourre, who was found liable in August for duping investors about a shoddy mortgage deal on the eve of the housing market’s crash.
In a statement, the SEC said it would not be discouraged from taking on other tough cases. “While the verdict in this particular case is not the one we sought, it will not deter us from bringing and trying cases where we believe defendants have violated the federal securities laws,” said John Nester, the agency’s spokesman.
Central to the SEC’s case was an eight-minute telephone conversation that took place on June 28, 2004, between Cuban and Guy Faur
The SEC alleges that Faur
But within hours, Cuban sold his 6.3 percent stake in the company.
At trial, Cuban denied wrongdoing and disputed Faur
Cuban’s attorney, Roberts, said the jury found that the information given to Cuban was not material, non-public information. It also rejected the SEC’s claim that Cuban agreed to keep that information confidential.
John C. Coffee Jr., a professor at Columbia Law School, said he was surprised that the SEC would take on a case that hinges on one person’s word against another.
“This was ultimately a credibility contest between Mr. Cuban and the other person on the disputed phone call, and Mr. Cuban won,” Coffee said.
While some legal experts tracking the case said the SEC deserves kudos for its resolve in going after a powerful, deep-pocketed celebrity who was willing to spend years defending himself, they agreed that the loss is a setback for the agency.
“It’s one thing to talk the tough talk, which they’ve been doing,” said Thomas O. Gorman, a lawyer at Dorsey & Whitney who has worked for the SEC’s enforcement division and the general counsel’s office. “It’s another to walk the walk. If you can’t win at trial, your ability to be the top regulator starts to dissolve.”