When the SEC charges someone with insider trading or any other crime, most lawyers will advise them that the best course of action is usually to keep their mouth shut and fight it in court. But some people just can’t help themselves. Martha Stewart, for instance, tried to fight her insider trading case in the court of public opinion, and it didn’t do her much good. Now another high-profile billionaire, Mark Cuban, is in the SEC’s sights. He knows that from a legal standpoint he should save his arguments for the judge, but he just can’t help himself. Cuban is fighting this case on his blog.
Or rather, he is letting his lawyers fight the case publicly on his behalf by printing their memos on his blog. Yesterday, he posted a response from his lawyer to the SEC complaint in which stated:
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.
He prefaced that with the single line:
I wish I could say more, but I will have to leave it to this, and let the judicial process do its job.
Yet today, he kept at it, posting another memo from his lawyer, hinting at how he plans to defend himself:
The SEC knows their case centers on one telephone conversation between two individuals- 4 years ago. The SEC claims there was an agreement between these parties to the conversation to keep certain information confidential. We interviewed Guy Faure, the former CEO of Mamma.com Inc., with whom the SEC claims Mr. Cuban made an agreement. We had a court reporter transcribe the interview. There was no agreement to keep information confidential.
The case revolves around 600,000 shares Cuban sold in 2004 after being alerted by the CEO of search-engine Mamma.com that it was planning an offering that would dilute Cuban’s stake in the company. Cuban was not a board member or corporate officer Momma.com, but that doesn’t really matter. As far as the SEC is concerned, insider trading occurs whenever anybody trades shares based on information about a company that is not yet public.
It appears that is exactly what Cuban did. But there is also a rule that would seem to apply here that it is only insider trading if the “person agrees to maintain information in confidence.” Judging from the questions Cuban’s lawyers asked the Mamma.com CEO at his deposition, his argument will likely be that he never made such an agreement.
The SEC might counter that he is sophisticated investor, he knew it was insider information, and he traded on it anyway, adding to his immense wealth while all the poor schlepps out there who also owned the stock had to take the hit.
There seems to be enough wiggle room here for a court to decide either way. And if it does go to court, there is one more factor that complicates matters in Cuban’s favor. According to an e-mail obtained by Andrew Ross Sorkin at the New York Times, an SEC staffer unaffiliated with this investigation harangued Cuban for being “unpatriotic” because he funded the conspiracy-theory documentary Loose Change, which was critical of the Bush White House.
Cuban’s lawyers might argue that this lawsuit is politically motivated retribution against Cuban in the dying days of the Bush administration.
So if this ever goes to court, the choice presented to jurors could be of a greedy billionaire versus a vindictive President. Either way, Cuban doesn’t want to end up in court. If he keeps laying down his cards in public, maybe he can bluff the SEC into folding.
See all
Post
yeah, bring the fight on. I am bored…
test on reply
how can I post a comment?
How stupid can a rich guy be? Well, posting part of an otherwise privileged attorney-client communication quite possibly makes the remainder of the communication non-privileged. His lawyer must be having a fit. An arrogant client with a big mouth, who thinks he’s always right. Go SEC.
In my opinion, the SEC view of insider information is flawed because it turns virtually any private disclosure into a tactic… Imagine if Mamma.com’s CEO heard that Cuban was getting soft on the stock to sell the stock anyway. He could then used disclosures like this to force him to hold his stock until the information is public.
Mark says: “how bout some street ball Mr. SEC?”
Sorry but he can’t fight against big brother!
We need to take down Big Brother. They are a nuisance to the public’s interest.
This case will be interesting to watch. One has to wonder, though, why on earth someone with so much money would make a knowingly risky decision just to protect a million dollars. He would have been far better off to let his stake dissolve, sell at a lower price and just cut his losses. Mass wealth means mass ego, I suppose.
“Now another high-profile billionaire, Mark Cuban, is in the SEC’s sights.”
Martha Stewart wasn’t, and isn’t, a billionaire.
Oh no?
http://money.cnn.com/2005/03/1.....lionaires/
Allow me to clarify. She wasn’t a billionaire when the SEC went after her, and she’s not a billionaire right now.
Sorry for the confusion.
Martha Stewart was billionaire, however briefly:
“The initial public offering was set at $18 per share, and rallied to $38 by the end of trading, making Stewart a billionaire on paper.”
Yes! This should be exciting! The guy is generally transparent, so we should get a good look at A LOT of detail.
Martha Stewart got a bum deal. I think she pissed someone off at a cocktail party and paid for it. Tons of people have done a lot worse than Martha and have made gobs of money doing it with no one saying anything. 9/11 pete(Rudy Giuliani) and his police pals made tons of money buying the 25 cent pennystock Taser on insider information and watching it go to almost $75 after police adopted the technology. Mark Cuban is getting the back shaft for having some balls to call these same people out.
Please… eaves drop on any silicon valley power lunch between consultants and you will hear more insider trader info to put 20 Martha’s in jail.
Go Mark! You’re an arrogant bastard, but that’s why we love you.
As long as he dosent purger himself he’ll be ok.
Frivolous…
Cuban is a fighter. Of course, I don’t know all the details (no one does), and if he’s innocent, then its nice to know he won’t go down and let people walk all over him.
Investors in MAMA at the time were not privy to the material Mark Cuban was made aware of.
He acted/sold on information that he, as an insider was made aware of.
Cuban threw a tantrum when the CEO told him in confidence (allegedly) about the PIPE deal and sold in anger.
He could have taken a stand and fought the company over this but instead he turned tail. He had to know his exiting this low float stock would hurt the share price and the investors holding at the time.
Cuban turned out to be no hero. Interestingly, he could have bought the company with pocket change.
Instead he later bought another metasearch engine, Rocketboom.
IceRocket, not Rocketboom.
“There was no agreement to keep this confidential”
That’s the base of the defense? I like Cuban. His rants are usually filled with some substance, but, I’m afraid he has committed a crime here. Its clear that the communication happened. The only way Cuban gets off is if the defense can make a case that Cuban is incompetent and doesn’t understand what confidentiality means in the form of a definition. Las Vegas odds have it 3 to 2 that he and his douche bag attorney will settle without admitting guilt and pay a fine.
Sorry, but guilty as charged.
Score:
USA: 1 - the govt has lots more money than Cuban
Cuban Attorney: 1 - he makes money on this deal. Merry Christmas unless he’s Jewish.
Mark Cuban: 0 - a purple eye and may wear convicted felon on his t-shirt
I think he is a member of the tribe.
This is a civil case, not criminal.
“the govt has lots more money than Cuban”
I beg to differ
Lets be honest- Mark Cuban pissed off someone in power and is getting a payback. This episode happened FOUR YEARS AGO. Maybe someone in power was jealous of his dance ability on “Dancing With The Stars” and dug up some past info.
test on comment
i think it works dude
Because we all know (alleged) crimes committed FOUR YEARS AGO, should not be bothered with.
Crimes committed four years ago should be bothered with, but if you’ve been *investigating* for four years and come up with nothing, you probably won’t ever get anything.
@Markus
Does your theory of “crime” stop short of murder
@Alex: I think (read: am sure) Markus was being sarcastic…
This happened. It’ll continue happening for years to come. This is Cuban’s Gordon Gecko moment!
Oh btw.
Check out http://www.jobstaxi.com
New Jobs. Razorfish. Art.com. Edge of Reality.
Doesn’t TechCrunch also do its legal fighting publicly on their blog?
Wanting to clear your name is also a fairly natural reaction.
This should make for interesting Digg postings
For peets sake the guy is as crooked as the day is long. Enough already.
ehss
http://www.anon.cz.tc
I find it pathetic that our country is in dire financial straits. We were bent over and taken without a reach around by multiple companies, yet Mark Cuban is the problem?
Countrywide, IndyMac, WAMU?
Martha Stewart tried to fight in the court of public opinion but that was crushed by the media as state propagandists and shills.
Martha Stewart is of no relevance to the illegal insider trading charges on Mark Cuban. She was never involved in any illegal insider trading. She had NO insider information. To save her company that the SEC wanted to destroy, she settled and agreed to none of the bogus allegations. She was never charged with illegal insider trading; she was railroaded in a bogus conviction on trumped-up charges pulled from the ether in a political persecution. It is about time the reckless and irresponsible media quit the media bashing on her with misinformation, misrepresentation, and agency propaganda.
I feel really bad for him. If he lost he would be a billionaire. Owned.
This whole Mark Cuban fiasco serves an important reminder that the SEC continues to ignore the issue of insider non-trading to the detriment of one and all.
http://dealflow.typepad.com/my.....ading.html
I hope he’s innocent and makes them look stupid.
I thought the exact same thing when I first heard this news.