October 15, 2013
(AP) A government lawyer told jurors that billionaire and Dallas Mavericks owner Mark Cuban had an unfair and illegal advantage over other investors when he dumped $7.9 million in shares of an Internet company and then lied about why he sold.
The Securities and Exchange Commission claims that Cuban broke a confidentiality deal in 2004 when he sold his shares in Mamma.com Inc., a Canadian search engine that was trying to compete with larger rivals such as Google Inc. The company's CEO had just told Cuban about a pending stock deal.
The stock offering would give a few private investors the chance to buy shares at a 10 percent discount plus get the right to buy more shares. The offering would hurt existing shareholders including Cuban, who owned 6 percent of Mamma.com, more than anyone else.
"The ordinary investor didn't have any of that information" and couldn't evaluate its importance, SEC lawyer Jan Folena told jurors. "Mr. Cuban could ... it took him one minute to sell everything he owned."
Folena spent 90 minutes summarizing the government's insider-trading case against Cuban, ending by saying of Cuban, "He didn't play by the rules, he wasn't fair, his trade was downright illegal."
After a three-week trial in Dallas, the case could boil down to Cuban's word against that of the Mamma.com CEO, Guy Faure, who testified by video that Cuban knew the stock details were confidential and was angry that he couldn't legally sell his shares because he had been given insider information. "'Now I'm screwed. I can't sell.'" Cuban said according to Faure.
Cuban testified that he never said any such thing and never agreed to keep Faure's information confidential or refrain from trading. He said that he did nothing wrong by selling his shares for $7.9 million before the company announced the private stock offering.
Cuban's lawyers were to get their chance to address the jury later Tuesday. Then jurors would begin deliberations. One juror became ill Monday, leaving two men and seven women on the panel. The case is being handled by U.S. District Judge Sidney Fitzwater.
The SEC wants Cuban to give up $750,000 in losses that he avoided by selling his Mamma.com shares when he did, and that he also pay a civil penalty. He doesn't face criminal charges.