Mark Cuban Responds to the SEC

This looks like it might be an interesting case.

If he is guilty, the conversation between Mark Cuban and the CEO of Momma.com will be absolutely pivotal, especially the source of the record of it. Secondly, the nature of the large sale of stock that Mr. Cuban made will be equally important. Was it previously planned and committed to without question? (and something more than altered notations on scrap paper as in the case of Martha Stewart).

Another issue is whether or not this was polticial payback for Mr. Cuban's participation in criticism of the Bush Administration and his involvement in the movie "Loose Change." Is the 'enemies list' another of the artifacts of the Nixon Administration that turned up in Bush II? There were many.

It will take a 'smoking gun' and a witness such as John Dean to bring that level of government misdeeds to light. That requires a confluence of events that cannot be predicted in advance. But the elements of secrecy, contempt for the laws, hubris, and a willingness to do 'whatever it takes' were all there.

This is a sideshow for now, and we cannot help but believe that Mr. Cuban's attorneys are urging him to shut up, take the fine, and settle. Judging from this he has not yet internalized their advice.

Let's see what happens.

The SEC
Mark Cuban's Blog
Nov 17th 2008 1:20PM

I wish I could say more, but I will have to leave it to this, and let the judicial process do its job.

November 17, 2008
RE: SEC Civil Action in the United States District

for the Northern District of Texas, Dallas Division

Mark Cuban today responded to a civil complaint filed by the United States Securities and Exchange Commission in the United States District for the Northern District of Texas, Dallas Division. In its complaint, the Commission charges that Mr. Cuban engaged in violations of the federal securities laws in connection with transactions in the securities of Mamma.com Inc.

This matter, which has been pending before the Commission for nearly two years, has no merit and is a product of gross abuse of prosecutorial discretion. Mr. Cuban intends to contest the allegations and to demonstrate that the Commission’s claims are infected by the misconduct of the staff of its Enforcement Division.

Mr. Cuban stated, “I am disappointed that the Commission chose to bring this case based upon its Enforcement staff’s win-at-any-cost ambitions. The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.”

SEC Sues Mark Cuban for Insider Trading

If this is accurate the evidence seems damning against Mark Cuban, who only says "stay tuned."

The question is all about the source of the record of the call between Cuban and the Momma.com CEO. Was it a recollection, a transcription, or a recording? It seems very detailed and incriminating. Was the sale already in the works, and did Mark go ahead with it on advice on counsel? Stay tuned indeed.

Bloomberg
Mavericks' Cuban Sued by SEC for 2004 Insider Trading
By David Scheer

Nov. 17 - Billionaire Mark Cuban, the owner of the Dallas Mavericks basketball team, was sued by U.S. regulators over claims he made illegal insider trades four years ago in shares of Internet search company Mamma.com Inc.

Cuban, 50, an investor in Mamma.com for four months, became ``very upset and angry'' in 2004 after the company told him in confidence it planned to sell stock below its trading price, the Securities and Exchange Commission said in a civil suit today at federal court in Dallas. Less than four hours later, he sold his 6.3 percent stake, avoiding more than $750,000 in losses after the company's share sale was announced, the SEC said.

``It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market,'' Scott Friestad, the SEC enforcement official overseeing the case, said in a statement.

Cuban was at the American Airlines Center in Dallas, home of the Mavericks, in late June 2004 when he got an e-mail from Mamma.com's chief executive officer, asking that he call as soon as possible, the SEC said. During an almost nine-minute call, Cuban promised to keep the information secret before learning the company planned a private investment in public equity offering, known as a PIPE.

``Cuban became very upset and angry during the conversation, and said, among other things, that he did not like PIPEs because they dilute the existing shareholders,'' driving down the value of their stock, the SEC wrote in its complaint. At the end of the call, Cuban told the CEO, ``Well, now I'm screwed. I can't sell,'' the SEC said.

Fines, Confiscate Gains

The agency's suit seeks to impose unspecified fines and confiscate gains from the trades.

Reached via e-mail for comment, Cuban responded ``stay tuned.'' His attorneys, Ralph Ferrara of Dewey & LeBoeuf LLP and Paul Coggins of Fish & Richardson LLP, didn't return calls.

Montreal-based Mamma.com changed its name to Copernic Inc. in 2007, according to the SEC. Copernic Chief Executive Officer Marc Ferland also didn't return a call seeking comment.

Cuban, owner of the HDNet high-definition television channel and the Landmark Theater chain, is among initial bidders this year for Major League Baseball's Chicago Cubs, the team's Wrigley Field home and a stake in a TV network. Sam Zell's Tribune Co. is trying to sell the assets by year-end to help pay off $11.8 billion of debt. A deal requires MLB owners' approval.

The SEC's suit ``will put a cloud'' over whether Cuban will buy the team, said sports banker Robert Tilliss of Inner Circle Sports in New York, who isn't involved in the sale. ``This will definitely put some doubts in people's minds about him being an approvable bidder.''

Broadcast.com

Baseball spokesman Pat Courtney declined to immediately comment. Tribune spokesman Gary Weitman didn't return an e-mail for comment. Zell's spokeswoman Terry Holt didn't return voice- mail or e-mail messages for comment.

Cuban made his fortune through the sale of Broadcast.com, the multimedia Web service he co-founded and which Yahoo! Inc. bought for $4.7 billion in 1999.

The next year Cuban purchased the Mavericks from Ross Perot Jr. for $280 million, a record at the time for a National Basketball Association team. The Mavericks became a championship contender under Cuban's control, ending a 10-year drought in his first full season by reaching the NBA playoffs in 2006.

Cuban, who often watches the Mavericks from courtside wearing a T-shirt and jeans, has racked up more than $1.3 million in fines for his criticism of basketball officials.