SEC sues NBA team owner over alleged insider trading

REBUTS US COMPLAINT A statement on Mark Cuban's blog says the SEC claims "are infected by the misconduct of the staff of its enforcement division."

NEW YORK - Billionaire Mark Cuban, the owner of the Dallas Mavericks NBA basketball team, was sued by US regulators over claims he made illegal insider trades four years ago in shares of Internet search firm Mamma.com Inc.

Cuban, 50, became "very upset and angry" in 2004 after the company told him in confidence it planned to sell stock below its trading price, the Securities and Exchange Commission said in a civil suit yesterday in federal court in Dallas. Within four hours, he sold his 6.3 percent stake, avoiding more than $750,000 in losses after Mamma.com's sale was revealed, the SEC said.

"It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market," Scott Friestad, the SEC enforcement official overseeing the case, said in a statement.

The SEC's complaint focuses on a series of phone calls and messages between Cuban, the company, and his broker. Cuban, who in 2006 started the website sharesleuth.com aimed at exposing "securities fraud and corporate chicanery," vowed in a statement to fight the SEC's allegations.

A statement on Cuban's blog said the SEC's claims stem from a "gross abuse of prosecutorial discretion" and "are infected by the misconduct of the staff of its enforcement division."

"I am disappointed that the commission chose to bring this case based upon its enforcement staff's win-at-any-cost ambitions," the statement quotes him as saying. "The government's claims are false and they will be proven to be so."

The agency's suit seeks to impose unspecified fines and confiscate gains from the trades.

Cuban was at the American Airlines Center in Dallas, home of the Mavericks, in late June 2004 when he got an e-mail from Mamma.com's chief executive, asking that he call as soon as possible, the SEC said. During an almost nine-minute call, Cuban promised to keep the information secret before learning the company planned a private investment in public equity offering, known as a PIPE.

"Cuban became very upset and angry during the conversation, and said, among other things, that he did not like PIPEs because they dilute the existing shareholders," driving down the value of their stock, the SEC wrote in its complaint. At the end of the call, Cuban told the chief executive, "Well, now I'm screwed. I can't sell," the SEC said. Cuban's attorneys at Dewey & LeBoeuf LLP and Fish & Richardson LLP didn't return calls.