Billionaire Mark Cuban, who is being sued by U.S. regulators for alleged insider trades in Mamma.com, said he saw “red flags” at the company before he sold his shares.
Cuban said in a filing last week in Dallas federal court that he needs access to U.S. Securities and Exchange Commission investigative documents on Mamma.com Inc., the Montreal-based Internet search company now known as Copernic Inc., to combat the civil insider-trading suit filed by the SEC in 2008.
The SEC accused Cuban of trading on confidential information when he sold his stake in Mamma.com just before it announced a private placement of shares. In an Aug. 29 filing requesting that the SEC share more materials from an investigation of Mamma.com, Cuban, 53, said he had other reasons to sell.
“Mr. Cuban has repeatedly stated that he sold his shares in Mamma.com in part because he saw ‘red flags’ in the company and he began to suspect that the individuals involved with Mamma.com might be ‘crooked,’” according to the filing, which states that the SEC was investigating Mamma.com “around this time.”
Cuban, who has denied wrongdoing, said in the filing he is seeking documents about the probe, which he said was closed without the commission taking action.
“This investigation into Mamma.com is highly relevant to Mr. Cuban’s motivation for selling his shares and could fully substantiate Mr. Cuban’s concerns about whether the individuals involved with Mamma.com were ‘crooked,’” the court papers state.
Joel Villeneuve, a spokesman for Copernic, didn’t immediately return a phone call seeking comment.
The SEC contends that in June 2004, Cuban found out about the company’s plan to raise money through a private investment, which would significantly dilute his stake in the company. He sold his shares, saving about $750,000 in losses, the SEC said.
SEC spokesman John Nester declined to comment on the filing. Thomas Melsheimer, Cuban’s lead attorney, didn’t immediately return a telephone call seeking comment.
Cuban is owner of the National Basketball Association’s Dallas Mavericks, the HDNet high-definition television channel and the Landmark Theater chain.
The case is Securities and Exchange Commission v. Cuban, 08-cv-2050, U.S. District Court, Northern District of Texas (Dallas)