Court revives SEC's lawsuit vs Mark Cuban
DALLAS — A federal appeals court revived the Securities and Exchange Commission's insider-trading lawsuit against Dallas Mavericks owner Mark Cuban on Tuesday, saying it was "plausible" he knew he was not supposed to sell stock in a company to avoid a loss after receiving confidential information.
The case was sent back to a lower court in Dallas for further discovery and, if necessary, a trial.
The SEC's civil lawsuit accuses the Dallas billionaire of selling shares in the Internet search engine company Mamma.com Inc. in 2004, avoiding a $750,000 loss after receiving confidential information about the company.
U.S. District Judge Sidney A. Fitzwater dismissed the lawsuit in July 2009, ruling that Cuban never agreed he could not act on his confidential information that the company was going to offer stock to private investment companies at a discounted rate.
The 5th U.S. Circuit Court of Appeals in New Orleans, however, said in its ruling Tuesday that it was "plausible" Cuban knew he was not to sell his shares until after the announcement of the offering.
"We are pleased with the court's decision and look forward to presenting our case," SEC spokesman John Nester said.
Cuban released a statement from one of his attorneys, Stephen Best, saying the Mavericks owner was disappointed in the ruling.
The SEC "brought this case as a result of a pre-existing bias against Mr. Cuban ... and prosecuted the case against Mr. Cuban in bad faith," Best said.
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.
Cuban has filed motions asking the SEC to pay his legal fees and accusing the agency of misconduct.