news Another Martha Steward railroad

[TD52]

Mark Cubin getting thr same thing
c/p
By KARA SCANNELL, LESLIE EATON and STEPHANIE SIMON

The Securities and Exchange Commission filed civil insider-trading charges against Mark Cuban, saying the Dallas Mavericks owner dumped his stake in an Internet company just after he heard confidentially that the company was about to issue low-priced shares.
video
'Maverick' Is Called On Insider Trading
1:43

WSJ's legal editor Ashby Jones discusses the SEC's civil charges of insider trading against Mark Cuban, owner of Dallas Mavericks. (Nov. 17)

Mr. Cuban, known for his tirades against National Basketball Association referees, quickly fired back at the securities cops, saying their claims were false, and that they had a "facts be damned" attitude.

It was the latest and most serious trouble for the flamboyant 50-year-old investor and sports entrepreneur, who has run up nearly $2 million in NBA fines. He once criticized the NBA executive in charge of referees as being so incompetent he couldn't manage a Dairy Queen. To placate offended Dairy Queen personnel, he subsequently spent a day at the fast-food chain, dishing out soft-serve ice cream.

In the SEC complaint against him, a witness described how Mr. Cuban allegedly flew off the handle in June 2004 when he was told about a proposed private offering in Mamma.com, an Internet company in which he had taken a roughly 6% stake earlier that year. Such an offering was likely to trigger a decline in the stock's price.
[Entrepreneur Mark Cuban, shown here reacting to a referee's ruling at a Dallas Mavericks-Sacramento Kings game in January, strongly denied allegations Monday of insider trading.] Getty Images

Entrepreneur Mark Cuban, shown here reacting to a referee's ruling at a Dallas Mavericks-Sacramento Kings game in January, strongly denied allegations Monday of insider trading.

According to the complaint, Mamma.com's chief executive emailed Mr. Cuban asking him to call as soon as possible. Mr. Cuban called four minutes later from the arena where the Mavericks play. "Well, now I'm screwed," Mr. Cuban reportedly said.

By the next day he had sold his entire stake -- just before Mamma.com shares started plunging, the complaint says.

Christopher Clark, a lawyer for Mr. Cuban, said, "We're shocked. We find it incredible that given all the important issues that the SEC has to address with regard to today's economy they've sought to bring a $750,000 case relating to a he-said, she-said about one trade against a person whose integrity has never been questioned before with regard to the securities markets."

Guy Faure, Mamma.com's CEO at the time, couldn't be reached for comment. Mr. Faure, who wasn't named in the complaint, left Mamma.com in 2007. Later that year, the company was renamed Copernic.

Mr. Cuban made billions of dollars in 1999 by selling an Internet company to Yahoo Inc. at the height of the dot-com boom, and remains drawn to the dot-com world. He wrote on his blog last summer: "Is there anything more fun than sitting around, growing your hair, drinking a Bud while listening to Jethro Tull and pondering how to change the balance of power in the search world and unseat Google?"
More

* Full Text: SEC Complaint
* BizTech: What's Mamma.com?
* Law Blog: Mark Cuban's Rough Stretch
* Deal Journal: Cuban and the Deal From Hell

From the Archives

* Page One: There's Bad Blood When the Warriors Play the Mavericks
5/1/2007
* Page One: After Hitting It Big on Internet, Cuban Is Scoring in Basketball
4/22/2003
* Point. Click. Spend $40 Million
12/21/1999
* Broadcast.com Chiefs Have Their Own Rules
1/12/1998

He also has a longstanding interest in exposing the shadowy world of small-company stocks and alleged chicanery by minor-league stock operators. Last year, he started Sharesleuth.com, a Web site that seeks to expose wrongdoing in that world. In a controversial move, Mr. Cuban discloses on the site that he may short-sell the shares of companies that he knows the site is about to discuss, seeking to profit from the expected decline in their shares.

One question in the case is why the SEC waited more than four years to file charges related to the 2004 share sale. Mr. Cuban had written about the sale of his Mamma.com stock as early as 2005 on his blog. The SEC said, however, that it didn't start pursuing the case until 2007. It isn't unusual for such investigations to last a year or two.

Mr. Clark, Mr. Cuban's attorney, said the "case 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's involvement with Mamma.com began when he bought 600,000 shares in the company, a 6.3% stake, in March 2004. According to the SEC complaint, in the spring of 2004, the company decided to raise money through an offering known as private investment in public equity, or PIPE. It says Mamma.com's CEO called Mr. Cuban on June 28, 2004, to gauge his interest in taking part.

The SEC said the CEO began the call by telling Mr. Cuban that he would have to keep the information confidential. That's typical in such offerings. But lawyers for Mr. Cuban said he was never given the proviso about confidentiality, and signed no confidentiality agreement.

An email sent shortly after the call seems to back the SEC's contention. According to the complaint, the executive chairman emailed a recap of the CEO conversation with Mr. Cuban to board members, and wrote: "As anticipated he initially 'flew off the handle,' and said he would sell his shares (recognizing that he was not able to do anything until we announce the equity) but then asked to see the terms and conditions."

That night, and the next morning, June 29, Mr. Cuban sold his full stake at about $13 a share. That evening, at 6 p.m., Mamma.com announced the PIPE financing. The following day, June 30, Mamma.com shares opened 9% lower than the prior day's close and continued to fall.

In a blog post on March 2, 2005, Mr. Cuban recalled the events. He called PIPE financing "a huge red flag" and wrote, leaving out some punctuation as he often does: "I dont want to own stock in companies that use this method of financing. Why? Because I dont like the idea of selling in a private placement, stock for less than the market price..."

Wayne Winston, a professor of information systems at Indiana University who helped Mr. Cuban with statistical modeling for his basketball team, defended his friend. "He's an honest, above-board guy in everything that I've dealt with him on," said Mr. Winston. "It seems like he was put in a bad position. He didn't ask to be told this stuff. He just got a call."

Even as it was announcing the charges Monday, the SEC acknowledged a stumble in the case involving an email last year by Jeffrey Norris, an SEC enforcement attorney in Fort Worth, Texas. In the email, sent to Mr. Cuban and SEC Chairman Christopher Cox, Mr. Norris described as "irresponsible and immoral" what he said was Mr. Cuban's support for "Loose Change," a movie suggesting the U.S. government was involved in the 9/11 terrorist attacks. Magnolia Pictures, a film company that Mr. Cuban co-owns through another of his companies, was discussed as a possible distributor of "Loose Change," but the head of Magnolia, Eamonn Bowles, said: "There was never any deal to do Loose Change."
[Mark Cuban watches the Dallas Mavericks during game against the New York Knicks on November 16 in New York City.] Getty Images

Mark Cuban watches the Dallas Mavericks during game against the New York Knicks on November 16 in New York City.

Mr. Norris couldn't be reached for comment.

The SEC said Monday that Mr. Norris wasn't at any time involved in the investigation, and that he is being reviewed for possible disciplinary actions. A spokesman said Mr. Cox "has never met the individual who corresponded with Mr. Cuban, nor has he spoken or corresponded with him in any way." He said Mr. Cox recused himself from the vote on whether to bring the insider-trading case against Mr. Cuban.

Mr. Cuban has a long history of irritating the powers that be. Within a year of his buying the Mavericks in 2000 for $285 million, the perennial doormat became one of the NBA's elite teams, and he became a major thorn in the side of NBA Commissioner David Stern.

Mr. Cuban ripped Mr. Stern, one of the most respected executives in his industry, for what he deemed to be poor business practices, and the league's officials for their on-court performances.

Beginning last year, he mounted a public campaign to buy the Chicago Cubs from Sam Zell's Tribune Co., telling interviewers he would invest a significant part of his fortune in delivering the Cubs' first World Series championship in a century.

In July, Mr. Cuban made a preliminary offer of $1.3 billion for the Cubs, Chicago's Wrigley Field, and a 25% interest in a local cable sports channel. But he appears to have been unable so far to raise the funds to back up the offer, according to rival bidders, and by late last week, word was circulating among them that he had dropped out of the running. In an email Friday, Mr. Cuban declined to comment on his efforts to buy the team.

Tribune has declined to comment on the bidding.

Mr. Cuban remains a force in Hollywood, too, owning a chain of movie theaters that has embraced digital-projection technology more quickly than most. Perhaps most jarring to the entertainment industry, he has sided with "peer-to-peer" services in which people share copyrighted content.

Mr. Cuban credits the older of his two young daughters with persuading him to take a turn on the reality-television show "Dancing With the Stars." He and his professional partner were eliminated after a poor showing in the samba.

Shortly after Mr. Cuban's purchase of Mamma.com shares, the SEC informed the company that it was investigating trading in its stock, according to regulatory filings. It was also looking into whether Irving Kott, a Canadian stock promoter with a history of regulatory run-ins, had a significant influence on the company through undisclosed shareholdings.

The company said Mr. Kott didn't have a controlling interest, but that an internal probe found "evidence of contacts with and involvement by Mr. Kott," which it didn't detail.

In September 2007, the company said the SEC investigation had ended without enforcement action. In the meantime, however, it settled a lawsuit with disgruntled investors who contended that Mr. Kott's interest should have been disclosed; the company didn't admit any wrongdoing, but agreed with its insurance company to pay $3.15 million to settle the suit.
—Sarah McBride and Matthew Futterman contributed to this article.company

just because he is famous and rich....they drag him into court and he only owned 6% of the shares
I don't watch sports...but because he is rich they go after him...he was trying to get money to buy a new team and not loose his butt in the sale to get "HIS" money and is not on the board of the company..he was told to sell because he would loose money if he did not...so he can not be charged with insider trading...but someone one wants to make a name for them self's
and it is was a Canadian company