Wednesday, October 7, 2009
SEC to appeal dismissal of Cuban case
DALLAS -- The Securities and Exchange Commission said Wednesday it plans to appeal a federal judge's dismissal of the agency's insider-trading lawsuit against Mark Cuban.
The SEC filed a notice in U.S. District Court in Dallas that it plans to take its case to the 5th U.S. Circuit Court of Appeals in New Orleans.
The outspoken billionaire owner of the NBA's Dallas Mavericks was accused in a civil lawsuit of selling his shares and avoiding a $750,000 loss after receiving confidential information about the Internet search engine company Mamma.com Inc. in 2004.
U.S. District Judge Sidney A. Fitzwater dismissed the case in July, ruling the agency didn't allege that Cuban had agreed not to trade on confidential information.
Fitzwater gave the SEC 30 days to amend the complaint if the agency could allege that Cuban agreed not to sell stock when he told the company's chief executive that he wouldn't divulge secret information he was about to receive.
Rather than amend the lawsuit, the SEC chose to appeal.
"We believe the District Court erred in dismissing our complaint, and we look forward to presenting our position to the Fifth Circuit Court of Appeals," SEC spokesman John Nester said in a statement.
According to the SEC, Cuban agreed not to share any information before Mamma.com Chief Executive Guy Faure told him in a phone call that the company planned to raise money through a private stock offering. The complaint says Cuban became angry because he said the plan would hurt his stock's value and ended the call by saying, "Well now I'm screwed. I can't sell."
The SEC alleges that Cuban sold his 600,000 shares, or 6.3 percent stake in the company, before the announcement of the private offering.
Stephen Best, one of Cuban's attorneys, said in a statement that Fitzwater dismissed the case "based on the SEC's own version of the facts."
Best also noted a recent court filing by Cuban that asked the SEC to pay his legal fees and accused the agency of misconduct.
"This appeal is nothing more than the SEC's desperate attempt to shock a heartbeat into a case that was dead on arrival," Best said. "It's just one more example of wasting taxpayer money."
The 51-year-old Cuban is a technology entrepreneur who sold his Broadcast.com to Yahoo Inc. in 1999 at the height of the dot-com boom. He bought the Mavericks in 2000.
Cuban runs a Web site called Sharesleuth.com, which bills itself as providing "independent Web-based reporting aimed at exposing securities fraud and corporate chicanery." A companion site, BailoutSleuth.com, tracks the government's $700 billion financial rescue plan.