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Jul 20, 2009 2:02 pm US/Central
Cuban: Perot, Jr. "Must Be Desperate" To File Suit
DALLAS (AP / CBS 11 + TXA 21) ―
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Owner of the Dallas Mavericks Mark Cuban argues a call during the game against the Denver Nuggets on January 13, 2009 at the Pepsi Center in Denver, Colorado.
AP
Dallas Mavericks owner Mark Cuban is accused of wrongfully diverting millions of dollars from the NBA franchise's home arena to help make up for cash shortfalls incurred by the team, according to a lawsuit filed by a company controlled by the team's former owner.
The lawsuit claims Cuban covered the Mavericks' financial shortfalls by obtaining more than $29 million in unauthorized loans through a limited partnership designed to distribute profits from the arena, the American Airlines Center. It accuses the Mavericks and three other companies controlled by Cuban of breach of contract, breach of fiduciary duty and unjust enrichment.
The company that filed the suit, Hillwood Center Partners, is controlled by former Mavericks owner Ross Perot Jr. and holds a small interest in the arena's limited partnership, Radical Arena. A related Perot company sold the Mavericks to Cuban in 2000.
The lawsuit was filed Wednesday in state district court in Dallas, and a copy was obtained Monday by the AP.
Cuban would not comment to the AP, but he did reply to an email sent by CBS 11/TXA 21. In it, he said, "I can only offer my opinion, which is that Ross Perot Jr. must be desperate from the losses he has suffered from Victory and his hedge funds." Cuban's entire email comment can be read at the end of this story.
Hillwood spokesman Eddie Reeves said the company tried unsuccessfully to resolve its issue with Cuban before filing the lawsuit.
"At this point, we feel this is the only option we are left," he said.
The suit claims Cuban, acting as Radical Arena's general partner, caused the partnership to make multiple loans to the Mavericks instead of distributing the funds within the corporation. The first loan was made in September 2006 and provided the Mavericks with $20 million at an interest rate of 5.4 percent, according to the lawsuit.
The transaction allowed the Mavericks to enjoy terms "substantially more favorable" than those the team would have obtained from an independent or unrelated lender, according to the suit. By not guaranteeing repayment of the note, Cuban avoided personal liability and obtained a substantial benefit for himself, the lawsuit alleges.
Cuban has twice extended the maturity dates of the loan and borrowed an additional $8.1 million, it said. At the same time, the loan's interest rate was reduced to 3.5 percent, according to the suit.
Radical Arena owns approximately 33.5 percent of Center Operating Co., which operates the American Airlines Center under a long-term lease with the city of Dallas, according to the lawsuit. Center Operating Co. collects rent from the facility's two main occupants, the Mavericks and the NHL's Dallas Stars.
Hillwood's lawsuit also claims that Cuban has borrowed another $15 million for the Mavericks from other arena-related entities.
The Dallas law firm that filed the lawsuit on behalf of Hillwood is the same one that has represented former Mavericks coach Don Nelson in his ongoing battle with Cuban to obtain more than $7 million in deferred compensation. Representatives of the firm, Figari & Davenport, declined comment.
On Friday, a federal judge dismissed an insider trading lawsuit filed by the Securities and Exchange Commission against Cuban because the agency didn't allege that he had agreed not to trade based on confidential information he received about an Internet search engine company, Mamma.com Inc.
We sent Cuban an email Monday, asking if he had a comment on the lawsuit. This is the full text of his reply:
"I can only offer my opinion, which is that Ross Perot Jr. must be desperate from the losses he has suffered from Victory and his hedge funds. My lawyers have been open with our minority partners, and in Mr. Perot's case, very minority, about the loans to the Mavericks. The loans have been used to put the best possible Mavericks team on the court, which in turn created the NBA's longest sellout streak and drove business to the AAC/COC and to Perot's Victory development. As best I could tell, he was very happy to take advantage of the traffic when he had an economic interest in Victory to do so. Unfortunately for Mr. Perot, he was apparently unable to capitalize on the benefit and is trying to find nickels in the sofa cushion.
"It is my understanding that Mr. Perot has received legal notice of the loans since they began, right after the Mavs appearance in the Finals as we tried to improve the team further. Only he knows why he has chosen to file a lawsuit and to make it public. The unfortunate reality is that this is the nature of our business relationship with Mr. Perot. From all I can tell, he could care less if the Mavs ever win a game. I have to tell you that the biggest mistake I made in buying the Mavs was in not completely buying out his interest."
(© 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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