Cuban’s bid to dismiss SEC suit denied
Testifying during insider trading trial, billionaire says he could have settled.
Mark Cuban says he learned he was being sued for insider trading when he turned on CNBC one day “and I was the headline.”
The billionaire and Dallas Mavericks owner told jurors in federal court Monday that the news made him “sick to my stomach.”
Cuban testified that he could have settled the case — he’s not likely to face more than $2 million to $3 million in fines and penalties if he loses — but he hired lawyers and fought back because “I did nothing wrong and I refuse to be bullied.”
Monday marked Cuban’s second day on the witness stand. In its lawsuit, the Securities and Exchange Commission accused Cuban of breaking a confidentiality agreement when he unloaded his shares in a Canadian Internet company in 2004. The government says he avoided $750,000 in losses by selling his shares on insider information about a pending stock offering before it was announced publicly.
Cuban was called as a witness by the SEC. When he finished two days of testimony late Monday, his lawyers asked U.S. District Judge Sidney Fitzwater to throw out the case, saying the SEC had failed to prove insider trading.
The judge, who had dismissed the case in 2009 only to be overturned by an appeals court, denied Cuban’s motion, meaning that the case eventually will go to the jury of seven women and three men.
Cuban detailed his concern over connections between Mamma.com Inc. and a convicted stock swindler, Irving Kott. Cuban’s lawyer offered emails indicating that he had raised questions about Kott with company officials before selling his shares.
Cuban’s side is highlighting Kott to buttress its defense that Cuban had many reasons for selling his stock. The SEC takes a different view, arguing that Cuban sold his shares only after learning privately about Mamma.com’s plan to issue additional shares — a move that would lower the value of Cuban’s stock.
“We’re not saying he fabricated his concern about Kott,” SEC lawyer Jan Folena said in court. “We’re saying his concerns about Kott are not the reason he sold his stock. There’s a difference.”
The trial pits the word of the sports team owner and regular on ABC’s “Shark Tank” against the testimony of Mamma.com CEO Guy Faure, who said that Cuban agreed to confidentiality before Faure told him about the stock deal in June 2004. The CEO said that the company believed Cuban wouldn’t trade on the information.
Cuban said he couldn’t recall details of the conversation, but that he would not have agreed to refrain from trading on what the CEO told him. “I didn’t feel I was under any limitations whatsoever,” Cuban testified. “So it makes no sense … that I can’t sell my stock.”
Cuban added, “I just don’t do oral confidentiality agreements,” partly because people can later dispute what was agreed upon.
Last week, jurors saw Faure in recorded testimony. As a Canadian citizen, he can’t be compelled to testify in a civil case in U.S. court.