Powered by The Atlanta Journal-Constitution

Web Search by YAHOO!
 

Updated: 12:38 p.m. Sunday, Sept. 29, 2013 | Posted: 12:37 p.m. Sunday, Sept. 29, 2013

SEC lawsuit against Mark Cuban heads to trial

Related

SEC lawsuit against Mark Cuban heads to trial photo
FILE - In a Thursday, Aug. 15, 2013 file photo, Dallas Mavericks owner Mark Cuban, right, gets a pat on the back from president of basketball operations Donn Nelson before a news conference, in Dallas. The government’s insider-trading case against Cuban goes to trial Monday, Sept. 30, 2013 in federal court in Dallas. (AP Photo/LM Otero, File)

By DAVID KOENIG

The Associated Press

DALLAS —

With the Dallas Mavericks' season-opening game still a month away, the basketball team's outspoken owner, Mark Cuban, will be seeing a different kind of court this week.

The government's insider-trading case against Cuban goes to trial Monday in federal court in Dallas. Cuban is expected to testify, and experts say the verdict could come down to whether jurors find the billionaire and regular on the ABC reality show "Shark Tank" to be likable or smug.

Cuban is accused of using insider information to dump his stock in a small Internet-search company in 2004 just before the shares fell in value. He avoided $750,000 in losses. The Securities and Exchange Commission wants Cuban to give up the money and pay a civil penalty.

The SEC's key piece of evidence is a phone call between Cuban and the CEO of Mamma.com. According to the SEC, the CEO told Cuban he had confidential information to share and Cuban agreed to keep it to himself. When the CEO said the company planned an offering of new stock, the SEC alleges, Cuban became angry because the offering would reduce the value of his 600,000 shares — and there was nothing he could do about it.

"Well now I'm screwed. I can't sell," Cuban said, according to the SEC.

But over the following two days, that's exactly what Cuban did, unloading his shares before the company publicly announced the stock offering.

Cuban disputes the SEC's version of the facts, and his lawyers argue that insider-trading laws didn't prohibit him from selling his shares.

U.S. District Judge Sidney Fitzwater agreed and dismissed the lawsuit in 2009, but his ruling was overturned by an appeals court, which sent the case back to Fitzwater for trial.

James Meyers, a former enforcement attorney at the SEC now in private practice in Washington, said that insider-trading cases are hard to prove because they rely on circumstantial evidence — a phone call, a stock trade, and a presumed link between the two — and because some jurors don't believe there's anything wrong with insider trading.

Cuban is expected to testify.

"A lot of it will come down to how Cuban comes across," Meyers said. He said that if he were Cuban's lawyer, "I would tell him to come across as humble and affable and not as master of the universe."

Sports Illustrated listed Cuban among the 50 most powerful people in sports. He's known for building the Mavericks into a winner and drawing at least $1.5 million in league fines, mostly for berating referees.

When the SEC sued Cuban in 2008, he went after the regulators. He accused SEC staff of bias — targeting him because of his political views and wealth. The SEC's inspector general, a government watchdog, said staffers made inappropriate comments about Cuban, but judged that their conduct didn't affect handling of the case.

James Cox, a law professor at Duke University who specializes in securities law, predicted that the SEC will win and said that Cuban should have settled. The stakes are high for the SEC too, he said. If the agency loses at trial, it might hesitate before filing the next insider-trading lawsuit.

The SEC has some recent victories, including an August verdict against a former Goldman Sachs trader for misleading investors in a huge deal involving risky mortgage-backed securities. But the agency could use a high-profile win in Dallas. The regulator has taken years of pounding for failing to uncover Bernard Madoff's massive investment fraud or bring charges against any top executives of Wall Street banks whose conduct contributed to the 2008 financial crisis.

Copyright The Associated Press

More News

 

Today on MyAJC.com

Hotoberfest kicks off another season of beer festivals

Hotoberfest kicks off season of beer festivals

Looking for something to do this weekend? If you are a beer lover, you might want to check out Hotoberfest 2013 at Historic Fourth Ward Park on North Avenue.

APS superintendent: Close 13 schools

Image hurts, helps in search for new superintendent

The hunt for a new leader of Atlanta Public Schools has picked up steam, with superintendent candidates being targeted from across the country to replace Erroll Davis, who will retire next year.

myajc logo 300x225

New 24-hour Digital Pass: Sample all of MyAJC.com for 99 cents

With a 24-hour digital pass, you can enjoy full versions of premium articles, news updates and access to the AJC online archives.

Irresistible news

Governor compares gay marriage to incest

Pennsylvania Republican Gov. Tom Corbett is in hot water after he compared same-sex marriage to incest in a TV interview.

Comments  (38)  

Tiger mauls employee at animal sanctuary

An Oklahoma woman is recovering after a tiger attacked her at a zoo in Wynnewood about an hour south of Oklahoma City.

Comments  (7)  

AP IMPACT: Families hoard cash 5 yrs after crisis

Families hoard cash 5 yrs after crisis

They speak different languages, live in countries rich and poor, face horrible job markets and healthy ones.

5 achievements that haven't won a Nobel Prize

5 achievements that haven't won a Nobel Prize

The announcements of this year's Nobel Prize winners will start Monday with the medicine award and continue with physics, chemistry, literature, peace and economics.