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Nov 17, 2008 6:02 pm US/Central
Mark Cuban Charged With Insider Trading
Reporting
Jack Fink
DALLAS (CBS 11 News) ―
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Mavericks owner Mark Cuban yells to a player during a game Feb. 2, 2000.
AP
The U.S. Securities and Exchange Commission has charged Dallas Mavericks owner Mark Cuban with insider trading.
The charge is a civil complaint, not a criminal one.
The government alleges that in June, 2004 Cuban sold 600,000 shares of Canadian search engine company
Mamma.com after he learned it would be making a stock offering. The management of Mamma.com invited Cuban to take part in the stock offering after he agreed to keep it a secret, according to the SEC.
But the government says, "Cuban became very upset and angry" because he knew the stock price would fall when the offering was publicly announced. The SEC quotes Cuban as telling the CEO, "Now I'm screwed. I can't sell."
The same day he learned about the impending offering, the government says, Cuban told his broker to sell all of his shares in Mamma.com.
At the time Cuban was the company's largest known shareholder, according to the SEC.
The SEC says when the stock offering was publicly announced, Mamma.com's stock price dropped more than 9 percent from the previous day's closing price. As a result, the SEC says, Cuban avoided losing more than $750,000.
John Teakell, a former attorney for the SEC, says the case could grow more serious.
"Because of the fact that it could be considered a significant case dollar-wise, and because of the fact that it involves Mr. Cuban, it may generate some interest in the U.S. attorney's office for a criminal investigation," he said.
Cuban's attorney Ralph Ferrara says the case has no merit.
In a recent blog post, Cuban wrote that he was disappointed the SEC staff's process was "result-oriented, facts be damned" and the allegations will be proven false.
The SEC tells CBS 11 News the case was investigated by its Washington, D.C. division. The complaint was filed in federal court in Dallas.
Click here to read today's court filing.
NBA officials said they had no comment on the matter.
Mamma.com changed its name to Copernic in 2007. Today its stock trades for less than $1 (check today's quote
here).
This isn't the first time that dealings with Mamma.com have attracted the attention of the government and the court system. The company has had a lot of legal problems during the past few years that are apparently unrelated to the SEC's action against Cuban.
At least one
class-action lawsuit has been filed by
people who claim a man with a "long history of criminal activity and stock fraud" actually controlled the company. The plaintiffs say it was a scheme to artificially inflate the company's stock price. You can read more about it
here,
here and
here.
(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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