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Cuban’s charges dismissed

Sat., July 18, 2009

SEC says billionaire engaged in insider trading; it may refile

WASHINGTON – Mark Cuban, the online entrepreneur and Dallas Mavericks owner known for his on-court antics, Friday escaped charges of insider trading.

Cuban’s defense was vindicated as a federal court in Dallas dismissed a Securities and Exchange Commission civil complaint that he avoided $750,000 in losses by trading based on confidential information about the Internet company

The ruling marks a key point in the billionaire’s confrontation with the SEC, which has 30 days to refile the case. During the case, Cuban launched counterattacks on the SEC from his blog.

The case also took a bizarre turn with the release of an e-mail that an SEC official wrote to Cuban to excoriate him for allegedly backing a movie about the Sept. 11, 2001, terrorist attacks. Later, Cuban sued the SEC for more information about the official and the agency’s investigation.

In the past, Cuban, who sold an Internet company to Yahoo in 1999 for billions and has since acquired the HDNet channel and a chain of movie theaters, has gotten into trouble in pro basketball, getting fined more than $1 million by the National Basketball Association for booing and cursing players. He faced his most serious charge, though, last November, when the SEC filed its insider trading case.

The SEC alleged that in June 2004, Cuban received a confidential briefing from the chief executive of, a search site, about a plan to sell additional shares at a below-market price. The plan would dilute the value of existing shares, of which Cuban owned 600,000. After learning of the plan, Cuban quickly dumped his investment. – now known as Copernic – went forward with the offering. The stock declined. The SEC claimed Cuban avoided more than $750,000 in losses.

Cuban’s defense was that he had no legal responsibility to refrain from trading on the information and had never agreed to do so.

Judge Sidney Fitzwater said in his order dismissing the case that the SEC had not proved that Cuban had a legal responsibility not to trade based on the information. The judge left the door open to the SEC filing an amended complaint if it can show Cuban had agreed not to trade based on the information. Legal experts said they expect the SEC to make such a filing.

In a posting on his blog after the case was filed, Cuban wrote that he was “disappointed that the Commission chose to bring this case based upon its Enforcement staff’s win-at-any-cost ambitions. The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.”

The clash between the SEC and Cuban grew stranger with the release of e-mails between Cuban and Jeffrey Norris, a trial lawyer in the SEC’s Fort Worth office. Cuban and Norris engaged in an acrimonious e-mail exchange about a movie studio co-owned by Cuban that considered distributing a film suggesting that the U.S. government had a role in the Sept. 11 terrorist attacks. “Either you are really an anti-American ideologue or your allegiance to making money is significantly greater than your dedication to the country,” Norris wrote to Cuban.

Cuban accused Norris of being against an “open market of ideas.”


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