Mark Cuban Says He Doesn’t Recall Confidential Warning
Mark Cuban, the billionaire owner of a professional basketball team, TV network and art-house movie theater chain, said he doesn’t recall details of a conversation in which he was allegedly warned that information he received about a company was confidential.
Cuban, 55, was called to testify by the U.S. Securities and Exchange Commission today in federal court in Dallas, where he’s accused of selling $7.9 million worth of his shares in a Canadian Internet search company, Mamma.com, after learning confidential information about a private placement plan that would dilute the value of his holdings.
Wearing a gray, pinstriped suit, blue shirt and striped tie, the owner of the National Basketball Association’s Dallas Mavericks smiled frequently as he answered questions from SEC attorney Jan Folena.
Cuban was the biggest stockholder of Montreal-based Mamma.com, with 6.3 percent of the shares. He liquidated his stake after being advised by then-Chief Executive Officer Guy Faure in a June 2004 phone call that the company was planning a private investment in public equity, or PIPE, transaction.
No Recollection
When Folena asked Cuban today about that conversation, in which Faure allegedly told him the PIPE information was confidential, Cuban said he didn’t recall the details of the discussion.
“You have no recollection of the words exchanged between you and Guy Faure on that phone call,” Folena said, phrasing the question as a statement.
“No recollection,” Cuban replied.
In pre-recorded testimony presented yesterday, Faure said he told Cuban during that call that the PIPE information was confidential.
The SEC sued Cuban in 2008 over the transaction executed in 2004, alleging he avoided a $750,000 loss by availing himself of non-public information. The agency is seeking disgorgement of his ill-gotten gains and unspecified civil monetary penalties.
Faure, whom Folena has called a key government witness, also said he had no written nondisclosure agreement with Cuban because he didn’t think one was required.
“At the end of the conversation, he mentioned something like, ‘Now I’m screwed. I can’t sell,’” Faure said.
Promote Company
Cuban, who also owns the HDNet TV network and the Landmark Theatre chain, has been a contestant on the television program Dancing with the Stars and currently appears on the investment-themed program Shark Tank.
He had offered to use his fame to promote the company and assist it with possible acquisitions, according to a Sept. 25 pretrial filing by U.S. District Judge Sidney A. Fitzwater summarizing each side’s claims.
“Just like I have my Mavericks cuff links on, I’m a promoter,” he told the jury today, pulling up his coat sleeve. Cuban said he is the kind of investor who would tell Walt Disney Co. where to place trash cans at its parks. “That’s the way I am,” he said.
Cuban can’t avoid testifying or answering questions by raising constitutional arguments against self-incrimination, said New York criminal defense attorney Stuart Slotnick, a partner in Buchanan Ingersoll & Rooney PC who isn’t involved in the case.
His Story
“He doesn’t have a Fifth Amendment right because he can’t be prosecuted,” Slotnick said yesterday. Any criminal charges arising from his alleged conduct would have had to be brought within five years of the act, the attorney said.
“He’s probably going to testify directly and forcefully,” said Slotnick, who has been following the litigation. “He maintains what he did was not improper and he’s going to tell his story.”
Jurors have also heard recorded testimony from Mamma.com Chairman David Goldman and live testimony from Arnold Owen, who worked for the investment bank handling the PIPE transaction and with whom Cuban also spoke before selling his shares.
While Owen told Cuban attorney Chris Clark he didn’t remember details of the June 28, 2004, phone conversation, he said he could recall that he didn’t ask Cuban to keep their conversation confidential and didn’t ask him to agree not to trade.
The case is Securities and Exchange Commission v. Cuban, 08-cv-02050, U.S. District Court, Northern District of Texas (Dallas).
To contact the reporters on this story: Andrew Harris in federal court in Chicago at aharris16@bloomberg.net; Tom Korosec in federal court in Dallas at tkorosec@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net