Internet entrepreneur Mark Cuban counters SEC charges on his web site
19 Nov 2008
Billionaire American investor and internet entrepreneur Mark Cuban, who also owns the NBA basketball team Dallas Mavericks, has countered charges of insider-trading levelled against him by the Securities and Exchange Commission (SEC).
The SEC had alleged that Cuban had sold stock basis information he had previously agreed to treat as confidential, and had filed charges against Cuban at the start of the week. The charges say that Cuban sold shares in internet search firm Mamma.com, based on non-public information because of which he avoided around $750,000 in losses.
Regulators say that Cuban had previously agreed with Mamma.com's chief executive Guy Faure that he would keep non-public information, pertaining to a planned secondary stock offering which was almost sure to undercut the company's share price, as confidential.
Cuban has now denied that he ever made such a promise hours before selling his stock in Mamma.com in 2004. In his defence, he has posted online an email that contains the purported transcript of a conversation between Faure and his lawyers, in which Faure has supposedly acknowledged that Cuban did not explicitly agree to keep the content of their conversation confidential.
According to the transcript, Faure remembers telling Cuban during the telephone conversation that he had "confidential information'' for him regarding the impending secondary-stock offering, but did not recall Cuban making any response to that statement.
Faure was asked by Cuban's attorney whether he recalled Cuban making any response, to which he replied in the negative. The transcript further says that the SEC is aware of this, as they have the transcript, but has chosen to go ahead with the case anyway.
Cuban posted the information on his blog in his defence of SEC's charges, saying that "The government's claims are false and they will be proven to be so." If the case is brought to trial, and a verdict goes in the SEC's favour, the billionaire investor could face millions of dollars in fines, and the forced disclosure of the issue in his future public financial filings.
In its filing, the SEC says that Faure had called Cuban in 2004 to inform him that the internet search firm Mamma.com was planning to undertake a "PIPE" stock offering, which basically aims to raise capital in a short period of time, even though they hurt a company's stock price. The complaint goes on to say that Cuban reacted angrily to that news, and within hours of the phone call, sold his entire six per cent stake in Mamma.com. When the news of Mamma.com's offering became public later, the company's shares fell sharply, but Cuban evaded losses of around $750,000 by already having sold his stock.
