Federal Judge Won't Toss Insider Trading Case Against Mavs Owner Mark Cuban
The now-five-year old insider-trading beef against mercurial Dallas Mavs owner Mark Cuban isn't going away anytime soon. Chief Judge Sidney Fitzwater rejected Tuesday a motion to dismiss the federal case against him, which alleges Cuban dumped his stock in an Internet search engine after getting tipped off by the CEO that their value was about to fall precipitously.
Filed back in 2008 by the U.S. Securities and Exchange Commission, the complaint claimed Cuban spoke with CEO Guy Fauré in 2004, who told him he needed to share some "confidential information." Cuban was then given news no shareholder with a big position wants to hear: The search engine, Mamma.com, was about to raise money by selling a bunch of shares to private investors, thus diluting the value of Cuban's 600,000 shares, resulting in a $750,000 hit, according to the complaint.
Cuban allegedly "flew off the handle." "Now I'm screwed. I can't sell," he said, according to Fauré. But sell he did, and the Feds claimed the information he dumped his stock on was confidential, and that he had a duty to refrain from using it. A federal district court judge disagreed, concluding there wasn't enough evidence of an agreement, implicit or otherwise, to bind Cuban. The SEC appealed, and the U.S. Court of Appeals for the Fifth Circuit vacated the lower court's ruling and kicked the case back.
In the meantime, Cuban claimed he was at the center of a witch hunt, targeted because of his celebrity and his politics. An inquiry into the investigation later cleared the SEC.
On Tuesday, Judge Fitzwater wrote in his opinion that the SEC's case was strong enough to at least go to trial.