By DAVE MICHAELS / The Dallas Morning News
dmichaels@dallasnews.com

WASHINGTON – The U.S. Securities and Exchange Commission charged Mark Cuban on Monday with insider trading stemming from a 2004 sale of stock in an Internet company.

The civil lawsuit alleges that Mr. Cuban avoided losses in excess of $750,000 by selling 600,000 shares he learned would be diluted by a new stock offering. The company, Mamma.com, told Mr. Cuban about the offering on the condition that he keep the information confidential.

“Less than four hours later, Mr. Cuban betrayed that trust by placing an order to sell all of his shares,” said Scott W. Friestad, the SEC’s deputy director of enforcement. “It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market.”

The complaint, filed in the Northern District of Texas, demands that Mr. Cuban forfeit the monetary losses he avoided and pay a civil penalty.

Mr. Cuban has retained Paul E. Coggins, a former U.S. Attorney for the Northern District of Texas, as his defense counsel. Neither Mr. Coggins nor his co-counsel, Ralph C. Ferrara, could be reached for comment Monday morning.

Mr. Cuban, the owner of the Dallas Mavericks, owned a 6.3 percent stake in the company, now known as Copernic Inc. At the time of the sale, he was the company’s largest-known shareholder.

Mr. Cuban was told about the stock offering through a phone call with Mamma.com’s chief executive on June 28, 2004, according to the SEC complaint.

Mr. Cuban “became very upset and angry during the conversation” because the private offering would dilute existing shareholders, according the complaint.

“Well, now I’m screwed,” Mr. Cuban told the executive. “I can’t sell.”

But Mr. Cuban later called his Dallas broker and ordered him to sell all 600,000 shares he owned. “Sell what you can tonight and just get me out the next day,” he said, according to the complaint.

Mr. Cuban liquidated his position on June 28 and June 29, before Mamma.com announced its new, private offering, the complaint says. On June 30, trading in Mamma.com opened at $11.89, down 9.3 percent from the June 29 closing price of $13.105.

Copernic’s stock plummeted in the months following the private offering, and it has never regained its June 2004 levels. In midday trading Monday, it was trading at 26 cents a share.

http://www.dallasnews.com...plaint.pdf
[Edited 11/17/08 11:12am]

Does this surprise u?

Graycap23 said:

Nah, not really. I always thought the Broadcast.com deal was kinda shady too. This is minor in the scope of things. More like some Martha Stewart shit. Let's see if he ends up in jail. If he does he's REALLY gonna be screwed.
[Edited 11/17/08 11:22am]

SCNDLS said:

U would be amazed at what people do 2 maintian or increase their net worth.

Graycap23 said:

I'm hearing it's a civil case so jail is not at stake, yet. But the Feds could file charges at a later date.
[Edited 11/17/08 15:55pm]

I'm wondering whether the SEC went after him for payback for voting for Barack Obama in the Presidential election, or if this was initiated by Sam Zell, The Chicago Tribune, some high-level Chicago executives or Bud Selig to try to stop him from purchasing the Chicago Cubs. He has show the most interest in buying the Cubs franchise, and he was probably the only interested party who immediately had the cash to buy the team outright.

Insider trading is a bit murky to me. I think it would take incredible integrity to not use the information you have to your advantage.

I understand there's a difference between having a good knowledge of the market and having private information, but I am not sure where that line is drawn.

NDRU said:

Read the complaint. He called his broker within minutes of talking to the CEO of the company.
[Edited 11/17/08 15:55pm]

SCNDLS said:

I know. But it seems the whole world of stocks is based on information, and the more into that world you get, the more privileged the info will be.

I understand there's a point at which you're actually committing a crime (like in this case you're acting on information that is not public) but again I think it would take a huge set of morals to not act on the info you get. And I don't see those guys as very moral by nature, but simply driven by money.

Anyway it's no great shock that this stuff happens

NDRU said:

Not at all.

I have two words for Mr. Cuban: "Consent decree".

If he doesn't avail himself of that tactic, I have two more words for Mr. Cuban: "Jail time".

NDRU said:

Preach that shit! Because I know damn well my Black ass would've sold off my shit had I known the stock was gonna drop, and the same goes for just about everyone else here .

WHY would a BILLIONAIRE (twice over, 2.3 I believe) risk jail time over losing around ONE MILLION?? Let me repeat - BILLIONAIRE...

CalhounSq said:

Ummmmm. . . greed and conceit, mayhaps?

Bill O'Reilly will blame the far left..lol

SCNDLS said:

I know but DAMN! Maybe I'm just used to bad shit happening to me or something but I would just KNOW I would end up in jail, & that would make me suck it up & lose the million

MuthaFunka said:

I remember when Martha Stewart got caught. I was talking with my uncle who was saying "yeah they got her!" and "she's a criminal," etc. And I asked if he had info wouldn't he act on it, and he said "of course I would!!"

CalhounSq said:

I hear ya. I wouldn't even TEST that shit. I'd just wait to sell the minute after they announced the shit. Mark was dumb to try it. He even told the CEO "I'm screwed and I can't sell my shares." THEN the CEO told him "You have to wait until we go public." After all that, he still placed a call to his broker minutes later. Dumb moves.

SCNDLS said:

yeah, I guess you could at least play by the rules and say to your broker, "wait until one second after they announce it."

NDRU said:

LOL Exactly!

NDRU said:

Exactly, it was only two days later anyways. And yes the price dropped but he would have only lost a fraction of the money he saved by doing it the illegal way. I could give him the benefit of the doubt if it wasn't for the "I'm screwed" remark. Now, he's REALLY screwed.

CalhounSq said:

Ask Martha Stewart!

NDRU said:

But the thing is, millionaires AND billionaires do this all the time (I bet Donald Trump and/or Bill Gates did it a few times). The only reason why Martha Stewart was punished was because she was a woman!

Yes I said it! Her setback had sexism written all over it.

And how dare "The Powers That Be" tell anyone it's illegal to save their stocks if that individual has the info a few hours/days before hand warning them about their potential money lost?!?

TonyVanDam said:

Dumb isn't it? Selective charges at best.