Mavs’ Cuban disputes insider trading charges

November 18, 2008 at 12:00a.m.

The Dallas owner is accused of using capitalizing on inside information.

WASHINGTON (AP) — Federal regulators on Monday charged Dallas Mavericks owner Mark Cuban with insider trading for allegedly using confidential information on a stock sale to avoid more than $750,000 in losses.

Cuban disputed the Securities and Exchange Commission’s allegations and said he would contest them.

In a civil lawsuit filed in federal court in Dallas, the SEC alleged that in June 2004, Cuban was invited to get in on the coming stock offering by Mamma.com Inc. after he agreed to keep the information private.

Cuban owned 6.3 percent of Mamma.com’s stock at that time and was the largest known shareholder in the search engine company, according to the SEC. The agency said Cuban knew the shares would be sold below the current market price, and a few hours after receiving the information, he told his broker to sell all 600,000 shares before the public announcement of the offering.

By selling when he did, Cuban avoided losses exceeding $750,000, the SEC said in its lawsuit.

Cuban, 50 and a multibillionaire, is a tech entrepreneur who sold his Broadcast.com to Yahoo Inc. in 1999 at the height of the dot-com boom. He bought the Mavericks in 2000 and spent heavily to improve the roster.

He is the best known figure to be accused by the SEC of illegal insider trading since its case against Martha Stewart in 2002 for allegedly using advance knowledge of negative news for a company to sell her shares and avoid $45,673 in losses. The homemaking diva paid about $195,000 and agreed not to serve as the director of a public company for five years under a 2006 settlement with the SEC.

Cuban’s fury at referee calls on the basketball court is legendary, and his verbal outbursts at referees, NBA officials and sports reporters have raised his profile. He has been fined more than $1 million by the league for a series of episodes dating back to 2000 and suspended from a few games.

“It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market,” Scott Friestad, the SEC’s deputy enforcement director, said in a statement. The agency alleged that Cuban acted with “scienter,” a legal term indicating knowledge of wrongdoing.