SEC charges Mavericks owner Cuban with insider trading

WASHINGTON - Federal regulators on Monday charged Dallas Mavericks owner Mark Cuban with insider trading on allegations he used confidential information on a stock sale to avoid more than $750,000 in losses.

Cuban disputed the Securities and Exchange Commission’s allegations and said he would contest them.

In a civil lawsuit filed in federal court in Dallas, the SEC alleged that in June 2004, Cuban was invited to get in on the coming stock offering by Mamma.com after he agreed to keep the information private.

Cuban owned 6.3 percent of Mamma.com’s stock at that time and was the largest known shareholder in the search-engine company, according to the SEC. The agency said Cuban knew the shares would be sold below the current market price, and a few hours after receiving the information, he told his broker to sell all 600,000 shares before the public announcement of the offering.

By selling when he did, Cuban avoided losses exceeding $750,000, the SEC said in its lawsuit.

Cuban, 50, a multibillionaire, is a tech entrepreneur who sold his Broadcast.com to Yahoo in 1999 at the height of the Internet boom. He bought the Mavericks in 2000 and spent heavily to improve the NBA team’s roster.

He is the best-known figure to be accused by the SEC of illegal insider trading since its case against Martha Stewart in 2002 on using advance knowledge of negative news about a company to sell her shares and avoid $45,673 in losses.

Cuban’s fury at referee calls on the basketball court is legendary, and his verbal outbursts at referees, NBA officials and sports reporters have raised his profile.

“It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market,” Scott Friestad, the SEC’s deputy enforcement director, said in a statement. The agency alleged that Cuban acted with “scienter,” a legal term indicating knowledge of wrongdoing.

The SEC is seeking a court judgment against Cuban finding that he violated the antifraud provisions of the federal securities laws, an injunction against future violations, an unspecified civil penalty and restitution of the losses Cuban is alleged to have avoided.

While the stock offering in question occurred more than four years ago, the SEC didn’t learn about the specifics of the case until early 2007, according to agency attorneys.

Cuban’s lawyer said in a statement that the SEC’s case “has no merit and is a product of gross abuse of prosecutorial discretion.”

Cuban, in his own statement, said, “I am disappointed that the (SEC) chose to bring this case based upon its enforcement staff’s win-at-any-cost ambitions. The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.”

Maureen Coyle, an NBA spokeswoman, said the league does not comment on such matters.