Mark Cuban, the owner of the Dallas Mavericks, is being charged with insider trading. The Securities and Exchange Commission (SEC) filed a civil suit on Monday claiming that in 2004, Cuban sold off his shares in a company right before the prices fell. By selling before the share prices dropped, Cuban saved himself $750,000, but that type of activity is illegal. Just ask Martha Stewart – she was fined $30,000 and did five months at Alderson Federal Prison Camp for it!
(This photo by James Duncan Davidson/O’Reilly Media, Inc. is licensed under Creative Commons Attribution 2.0 License)
The SEC suit states that Cuban sold 600,000 shares of Canadian-based Mamma.com in June 2004. In March, the share price of Mamma.com had tripled in only a two day period, so this was one hot stock. But, on June 28, 2004, Cuban reportedly received an email from the chief executive of Mamma.com that told him of a planned stock offering, which could have lowered the share prices.
Cuban called the executive and the chief executive said in an email to the chairman that Cuban“flew off the handle” and said he would his shares in the company, which is exactly what he did minutes after talking to the executive. He got $13.24 per share and the next day, Mamma.com shares were at $11.89. The share prices eventually dropped to $8, then down to just 28 cents. Mamma.com is saying they gave Cuban confidential information then he betrayed them by selling off his shares immediately.
Cuban has denied the charges, saying he has been the target of a political vendetta by the SEC because it is results-oriented now that the Bush administration is coming to an end. Supposedly, Jeffrey B. Norris, a lawyer for SEC, was angered that Cuban backed a documentary titled Loose Change which insinuated that Bush planned the destruction of the World Trade Center just to be able to go to war in Iraq. Because he was upset by this, Cuban feels like Norris was out to get him any way he could.
Now Cuban, a billionaire from the dot-com era, is a high profile owner of the NBA Mavericks who has incurred almost $7 million in fines for mouthing off to referees and such. He’s not afraid to back down from a fight, so the Commission may have bit off more than they can chew unless they have good evidence against Cuban.