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Published November 18, 2008 at 9:16 AM
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 Looks like the drama surrounding Mark Cuban is just getting started, and it could keep him out of the running to buy the Chicago Cubs. On Monday, the Securities and Exchange Commission filed a civil suit in
Dallas charging Cuban with insider trading for selling shares of a small
Internet search company Mamma.com in 2004, just before its share price fell. Cuban avoided a loss of $750,000, according to the complaint. But the story is now quickly morphing into a cross between the movies "Wall Street" and "Absolute Power." Apparently the plot now includes inside information, which includes charges of prosecutable misconduct and payback for a movie critical of President Bush that Cuban financed.
Continue reading below
After the SEC hit Cuban with the charges
related to his sale of stock in Momma.com, Cuban issued a statement through his lawyer and wrote on his
blog that he could say no more. In the statement his lawyer said:
This matter, which has been pending before the Commission for nearly
two years, has no merit and is a product of gross abuse of
prosecutorial discretion. Mr. Cuban intends to contest the allegations
and to demonstrate that the Commission's claims are infected by the
misconduct of the staff of its Enforcement Division.
While Mr. Cuban stated, "I am 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."
And Cuban's lawyer might have some basis for his allegation of misconduct, as the The New York Times Floyd Norris writes:
A person close to Mr. Cuban provided me with a copy of an
e-mail message said to have been sent by Jeffrey Norris, an S.E.C.
lawyer in the Fort Worth regional office (and no known relation to me.)
This e-mail message seems to have been sent after an exchange in which
Mr. Norris complained that Mr. Cuban had financed a movie called "Loose
Change" that discusses the president's actions relating to Sept. 11. ...
If this upsets you, I wonder how George Bush feels. I
assume that Mr. Cox would view your involvement with "Loose Change"
much as I do. After all, he served his country as a Republican
Congressman from Orange County for nearly 20 years and was appointed by
President Bush. If you feel like sharing my thoughts with Chairman Cox,
be my guest.
Since Chairman Cox may not know the background, I will
explain. Mark Cuban is the owner of the Dallas Mavericks and has
participated in distributing the vicious and absurd documentary, "Loose
Change," which posits that President Bush planned the demolition of the
World Trade Center as a pretext for going to war against Iraq. We have
had some past exchanges about my opinion the Mr. Cuban's support for
this project is irresponsible and immoral. Below, I parodied his
position that every opinion, no matter how absurd and vicious, deserves
to be broadly disseminated.
The SEC has since responded that the investigation of Cuban took place in
the Washington office, not in Texas where Norris works.
Additionally, in spite of any political reasons for going after Cuban,
the SEC is still sitting on proof that Cuban knew about the PIPE deal
and sold his shares early anyway. Still, the accusations could take their toll on Cuban. Cuban is one of five bidders in the final round of Tribune Co.'s Cubs, and the accusations could hurt his
chances as bids for the Cubs approach a Nov. 26 deadline, according to Crains Chicago
Business. "Mr. Cuban
reportedly already faced an uphill battle for the approval he would need from
two-thirds of the current Major League Baseball owners, in part because of his
bombastic style. The insider-trading complaint 'could very well drive a stake
into the heart of his attempts to acquire the franchise,'says Frank Murtha, a
sports consultant who also teaches at Northwestern University. 'It will probably
give Major League Baseball owners pause, or an additional excuse or reason not
to approve him in an ownership capacity.'"
Other bidders for the Cubs include the Ricketts family, a founder of online brokerage TD
Ameritrade Holding Corp., and Chicago real estate investor Hersch Klaff. - Donna Block and George White
See NY Times blog post See Cuban's blog post and statement
See Dealscape post on Cuban insider trading charges
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