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.

Goldman Sachs Target of Naked Short-Selling and Price Manipulation Complaints in High Yield Loan Markets

The charge is that as an agent bank Goldman Sachs has access to private information that gives it an advantage in the opaque market of high risk debt, and they have been using that information to target certain portions of the market with naked short selling to drive down prices and reap large profits for themselves at the expense of their clients and other market participants.

This is the template for potential market fraud that we described previously on several occasions. The banks have privileged information and access to funds that precludes a level playing field with other market participants. The uneven enforcement of the rules by the SEC and CFTC and lack of transparency in other markets is another significant factor.

We should note that the fails in this end of the markets are relative small change when compared to the fails in the Treasuries markets as we have previously shown, overseen by the Fed.

Now that Goldman is trading with public funds from the Treasury granted without oversight or restrictions by their former chairman the situation becomes even more outrageous, almost incredible.

Perhaps there is no explicitly legal wrong-doing. And we are only using this allegation against Goldman Sachs as an example. But even a simple top down examination of the market structures shows the weakness of our regulatory process, and the failure of crony capitalism and laissez-faire self-regulation to create markets that are transparent and worthy of trust and confidence for all participants. They more closely resemble dishonest poker games.

Until the financial system is reformed there can be no sustainable recovery.

Bring back Glass-Steagall and honest, responsive, and transparent regulation of the markets.


Bloomberg
Goldman Targeted by Investor Complaints of Naked Short-Selling
By Pierre Paulden and Caroline Salas

Nov. 17 (Bloomberg) -- Investors in the $591 billion high- yield, high-risk loan market are accusing Goldman Sachs Group Inc. of naked short selling to profit from record price declines.

At least two fund managers complained verbally to officials of the Loan Syndications and Trading Association, saying they believe Goldman helped drive down prices by using the technique, according to people with knowledge of the objections. New York- based Goldman is acting against its clients by trying to profit at their expense, the investors said.

A $171 billion drop in the value of the loans in the past year is pitting banks against investing clients on assets once considered so safe they typically traded at par. The drop exposed flaws in an unregulated market where trades can take from several days to months to settle and banks may have information unavailable to investors. In a naked-short transaction, a firm would sell debt it didn’t already own, betting the price will fall before it purchases the loan and delivers it to the buyer.

“The LSTA is closely monitoring issues of naked short selling,” Alicia Sansone, head of communications, marketing and education at the New York-based industry association, said in an e-mail.

The group, comprising banks and money management firms that trade the debt, plans to tighten rules to ensure transactions are settled more quickly and prices reported accurately, Sansone said. She wouldn’t elaborate or discuss the claims against Goldman....

Most Aggressive

The bank was seen as the most aggressive in recent months in selling loans at prices below other dealers’ offers and taking longer than the LSTA’s recommended seven days to settle the deals, according to the investors complaining to the trade group.

There’s no rule preventing naked short selling of loans. The U.S. Securities and Exchange Commission this year banned the practice for 19 stocks including Lehman Brothers Holdings Inc. and Fannie Mae and Freddie Mac from July 21 to Aug. 12 as share prices plunged. New York-based Lehman, once the fourth-biggest securities firm, eventually went bankrupt and Fannie and Freddie, the two largest mortgage-finance providers, were brought under government conservatorship. (Excuse us but isn't naked short selling of stocks illegal in the US? The SEC just does not enforce the law and the list of 19 was just a declaration of vigilant enforcement for a select group of 'special companies.' - Jesse)/em>

The slump in loan prices during the global seizure in credit markets is causing particular disruption in the loan market because the debt typically trades close to 100 cents on the dollar. Prices never were below 90 cents until February this year. By October they had fallen to a record low of 71 cents, according to data compiled by Standard & Poor’s. The decline, which S&P said equated to losses of about $171 billion, helped drive the complaints from fund managers.

‘Shell-Shocked’

“Investors are shell-shocked” by the decline, said Christopher Garman, chief executive officer of debt-research firm Garman Research LLC in Orinda, California. “In many ways they’re all but wiped out.”

Because prices were so stable, short sales of loans were unheard of until now, Elliot Ganz, general counsel of the LSTA, said at the group’s annual conference in New York last month.

“No one ever shorted loans,” Ganz said. “Prices never went down.”

High-yield, or leveraged, loans are given to companies with below-investment grade ratings, or less than Baa3 at Moody’s Investors Service and under BBB- at S&P. Banks typically form a group to arrange the financing. They then find other investors to take pieces of the debt, helping spread the risk.

Those loan parts can trade through private negotiations between banks and hedge funds or mutual funds. One of the lenders involved in the initial deal remains the so-called agent bank, which keeps track of who owns what piece. Unlike bonds and stocks, the debt doesn’t trade on an exchange and has no central clearinghouse.

Agent Banks

When a loan changes hands, the agent bank must sign off on the transaction, meaning it knows exactly who is buying and who is selling. The rest of the market is in the dark. Getting an agent to sign off, also can delay settlement.

“An agent will have a bird’s-eye view of who owns what and when,” said John Jay, a senior analyst at Aite Group LLC, a research firm that specializes in technology and regulatory issues in Boston. “They have information that no one else has....”

Three Days

In the bond market, the standard settlement time is three days following the trade. In a bond short sale, a trader acquires debt by borrowing the security in a deal known as a repurchase contract. The two sides specify how long the bond will be borrowed with the right to renew the pact. Because loans can’t be borrowed through such agreements, any short seller would have to go naked.

While the LSTA doesn’t track the amount of loans currently unsettled, at least 700 trades made by Lehman Brothers Holdings Inc. before it filed for bankruptcy hadn’t cleared, Ganz told last month’s conference....

Saudi Arabia Spends $3.5 Billion to Buy Gold in the Past Two Weeks

Gulf News
Gold demand rises in Saudi Arabia
By Mariam Al Hakeem, Correspondent
November 12, 2008, 23:42

Riyadh: There has been an unprecedented demand for gold in the Saudi market recently, with over 13 billion Saudi riyals (equivalent to US $3,466,667,946) (Dh12.75 billion) being spent on the yellow metal during the last two weeks.

Demand is expected to rise still higher as more investors turn to gold as a safe haven in the midst of the global financial crisis, according to market sources.

Sami Al Mohna, an expert on the gold market, said the trend had resulted in a substantial rise in the gold reserves of Saudi investors....

Hartford Insurance Becomes a Savings and Loan and Taps Uncle Sugar's CPP

There seems to be a bias to do whatever it takes to support big bonus and dividend paying financial companies, even one as diverse as GE, but to continue to let the manufacturing sector and blue collar jobs go to hell in a handbasket for the sake of global competitiveness and lower wages.

Yesterday the talking heads on Bloomberg and CNBC were ripping US manufacturing for its bad management practices, and blue collar workers for their extravagant wages, while praising the use of public money to generously subsidize the financial sector that caused this mess.

It was a truly Orwellian moment. What a collection of shameless, self-serving parasites!

Hartford's stock jumped 25% on the news, and helped to buoy the market. This did not last as the markets sold off heavily in the last half of hour trading. This Administration's economic policies are as bankrupt as they have left the Treasury.

The Hartford Announces Agreement To Acquire Federal Trust Bank
And Application To U.S. Treasury Capital Purchase Program
Friday November 14, 3:20 pm ET

HARTFORD, Conn. - The Hartford Financial Services Group, Inc. (NYSE: HIG) today announced that it has applied to the Office of Thrift Supervision (OTS) to become a savings and loan holding company and has applied to participate in the U.S. Treasury Department’s Capital Purchase Program (CPP).

In conjunction with these applications, The Hartford has signed a merger agreement to acquire the parent company of Federal Trust Bank for approximately $10 million and will also provide an additional amount to recapitalize the bank. Federal Trust Bank, a federally chartered, FDIC-insured savings bank is owned by Federal Trust Corporation, a unitary thrift holding company headquartered in Sanford, Fla. The completion of this acquisition will satisfy a key eligibility requirement for participation in CPP.

“We are taking these actions as a strong and well-capitalized financial institution looking for maximum flexibility and stability,” said Ramani Ayer, The Hartford’s chairman and chief executive officer. “Securing capital at the terms available through the Capital Purchase Program could be a prudent course in this market environment and would allow us to further supplement our existing capital resources.”

The Hartford’s purchase of Federal Trust Corporation is contingent on Treasury’s approval of The Hartford’s participation in the CPP, approval of the acquisition by the shareholders of Federal Trust Corporation, and the Office of Thrift Supervision’s approval of The Hartford’s application to become a savings and loan holding company. The Hartford estimates that it would be eligible for a capital purchase of between $1.1 billion and $3.4 billion under existing Treasury guidelines. The final amount of capital request will be determined following approval by Treasury.

About Federal Trust Corporation

Federal Trust Corporation is a unitary thrift holding company and is the parent company of Federal Trust Bank, a federally-chartered, FDIC-insured savings bank. Federal Trust Bank operates 11 full-service offices in Seminole, Orange, Volusia, Lake and Flagler Counties, Florida. The company's executive and administrative offices are located in Sanford, in Seminole County, Florida.