Mark Cuban goes to trial in insider-trading case
Jury selection began Monday in the case of Mark Cuban, the Dallas Mavericks’ billionaire owner, who is accused of using insider information in 2004 to avoid a $750,000 loss by selling his shares in a Canadian Internet company.
Mark Cuban, billionaire owner of the Dallas Mavericks basketball team, has gone to trial over regulators’ claims he engaged in insider trading when he sold his stake in a Canadian Internet search company nine years ago.
The U.S. Securities and Exchange Commission (SEC) in 2008 accused Cuban of acting on confidential information when he unloaded his 600,000 shares of Mamma.com four years earlier, just before it announced a private placement of shares.
The case was revived in 2010 after U.S. District Judge Sidney Fitzwater in Dallas dismissed it. Fitzwater came close to throwing it out again in March.
Jury selection started Monday with a pool of 64 prospective jurors. The trial will probably last eight to 10 days, the parties have told the judge.
Cuban maintains he did nothing wrong.
“I am excited about this, to finally come to court,” Cuban said Monday before entering the courthouse. “I won’t be bullied. That’s the key element.”
Fitzwater said Monday that he intends the jury to start deliberating by Oct. 17.
Cuban’s lawyers said in court papers that the SEC accused their client of misappropriating confidential company information for his personal use in selling Mamma.com securities.
“The record shows that nothing could be further from the truth,” the attorneys wrote.
Cuban, chairman of the high-definition television network HDNet, has owned the Mavericks of the National Basketball Association since 2000.
He also owns the Landmark Theatres chain, has been a contestant on the television program “Dancing with the Stars” and appears regularly on the TV show “Shark Tank.”
In 1999, he sold Broadcast.com, a multimedia Web service he founded, to Yahoo for $4.7 billion.
Cuban was the biggest stockholder of Montreal-based Mamma.com, holding 6.3 percent of its shares, and had offered to use his fame to promote the company and assist it with possible acquisitions, according to a Sept. 25 pretrial filing by Fitzwater summarizing each side’s claims.
The SEC claims that in April 2004, one month after he bought 600,000 shares of Mamma.com stock, Cuban told then-CEO Guy Faure, “Obviously what you tell me is confidential,” according to Fitzwater.
In a June 2004 phone conversation, Faure allegedly told Cuban he had confidential information for him and asked if he was interested in participating in a new offering that diluted the company’s shares by 8.5 percent, the judge wrote.
Near the end of the conversation, Cuban allegedly told Faure, “Now I’m screwed. I can’t sell.”
That day, one minute after ending a phone conversation with a sales agent for the share offer, Cuban called his broker and told him to sell all his shares, according to the summary.
The next day, before the placement was made public at the market close, Cuban’s broker sold the shares, enabling Cuban to avoid a $750,000 loss, according to the SEC.
Mamma.com fell 8.5 percent on June 30, 2004, the first trading day after the private placement was announced, and 15 percent the day after the investor’s sales were disclosed in a regulatory filing made public on July 2, according to data compiled by Bloomberg.
The company is now known as Copernic.
Cuban contends the SEC can’t prove a confidentiality agreement was formed between him and Mamma.com and says he made no agreement that he couldn’t trade on information about the private share offering, Fitzwater wrote.
Cuban’s lawyers have said the commission’s proof falls short in several other areas, including whether he was reckless, whether he disclosed he was going to sell his stock and whether he used the offering information to sell, according to the summary statement.
The case has stretched to five years with disputes over insider-trading law, SEC conduct and other matters.
After the judge dismissed the case in 2009, a U.S. appeals court in New Orleans reversed that ruling and revived it.