The Securities and Exchange Commission’s insider trading lawsuit, filed yesterday in federal court in Dallas, said Cuban broke the vow after speaking by phone with Mamma.com’s CEO in 2004. Cuban became angry after learning in the call that the company planned to sell shares below the trading price, the SEC said. That same day, he arranged the sale of his 6.3 percent stake.
“There was no agreement to keep information confidential,” Cuban said today on his blog. Mamma.com’s former CEO Guy Faure has said he had no recollection of the comments, according to Cuban. “The SEC knows this — they have the transcript, yet they brought the case anyway. Why?” Cuban asked.
Cuban is the most prominent US individual targeted for alleged insider trading since the SEC sued Martha Stewart in 2003. Cuban has accused the agency of a “gross abuse of prosecutorial discretion,” and vows to fight the charges.
The FEC lawsuit says that in late June 2004, Cuban spoke by telephone to Mamma.com’s chief executive officer and promised to keep the content of the conversation secret. During the almost nine minute call, Cuban learned the company planned a private investment in public equity offering, known as a PIPE.
According to the SEC complaint, 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. At the end of the call, Cuban told the CEO, “Well, now I’m screwed. I can’t sell,” the SEC reported.