Mark Cuban’s Desire to Win Led Him to Break Law, SEC Says
Mark Cuban’s “desire to win, that competitive edge that makes him successful,” led the billionaire owner of the Dallas Mavericks to illegally sell stock on an insider tip, a U.S. lawyer told a federal jury.
Jan Folena, an attorney with the Securities and Exchange Commission, summed up the government’s case against Cuban by telling jurors, “We’re going to end this trial right where we started it, with the words of Mark Cuban: ‘Now I’m screwed. I can’t sell.’”
Cuban “knew he was screwed,” Folena said yesterday in federal court in Dallas, reciting testimony from a government witness. “He knew he couldn’t sell but he did it anyway.”
The seven women and two men on the jury will begin deliberations today. They will decide whether Cuban must give up the $750,000 he allegedly spared himself from losing in 2004 with the sale of his 6.3 percent stake in Mamma.com, a Canadian Internet company.
The agency also seeks other unspecified penalties.
Cuban made the sale after learning allegedly non-public information in a phone call from Guy Faure, the company’s chief executive officer, about a private placement plan that would have diluted the value of his shares, the SEC said.
Cuban, 55, who also owns the high-definition television network HDNet and the Landmark Theatre cinema chain, has denied the allegations. Before selling his shares, he had been the biggest investor in Montreal-based Mamma.com, which is now known as Copernic Inc.
In a recording played for the jury, Faure testified that he told Cuban the information was confidential and also testified that the billionaire was upset at the end of their eight-minute conversation, telling him that now he was “screwed.”
“We have proven in this case through the testimony of Guy Faure that Mark Cuban made that statement,” Folena said.
She told the jury Cuban failed to play by the rules.
“Find Mark Cuban liable,” Folena said. “His trade was downright illegal. Of all the investors in the market, Mr. Cuban knew better.”
Cuban’s attorneys rested their case yesterday after the testimony of their final witness, Erik Sirri, who led the SEC’s division of market regulation and trading from 2006 to 2009.
“My opinion is the information about the PIPE was public before Mr. Cuban traded,” said Sirri, who was testifying as a defense expert, referring to private investment in public equity.
Defense attorney Thomas Melsheimer echoed Sirri’s testimony in his closing argument.
“The information about the Mamma.com PIPE was public,” he said. “Mr. Cuban made no agreement to keep anything confidential. Mr. Cuban made no agreement not to sell his stock. Mr. Cuban disclosed his intent to sell his stock.”
The Mavericks owner behaved as though he had nothing to hide because he had nothing to hide, Melsheimer said.
Melsheimer urged the jury to give little weight to Folena’s recital of Faure’s testimony about Cuban’s comments.
“Saying it over and over again does not make it true,” he said.
The defense lawyer exhorted the jury to “stand up to the government,” telling them only they could tell the SEC it’s wrong.
“Refuse to be ground down in the cog of a machine like the SEC that grinds on even when the federal government is shut down,” Melsheimer said.
Ten jurors were initially empaneled for the trial that began Sept. 30. One of the three men on the jury was excused because of illness, U.S. District Judge Sidney A. Fitzwater said in court yesterday.
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: Tom Korosec in Dallas federal court at firstname.lastname@example.org; Andrew Harris in Chicago at email@example.com
To contact the editor responsible for this story: Michael Hytha at firstname.lastname@example.org