Mark Cuban, billionaire owner of the Dallas Mavericks testified that he “generally doesn’t agree to treat as confidential information what people tell him about investments.” Cuban got rid of his shares in the Canadian Internet company mamma.com. The SEC claims that he saved his $750,000 that would have otherwise been lost, by selling before the quarterly announcement was made, or in other words, he sold his stocks based on information privy to only a few insiders and made the sales before the information went public. He is accused therefore of insider trading. Insider trading is defined as the “illegal practice of trading on the stock exchange to one’s own advantage through having access to confidential information.”
According to Yahoo News, Mark Cuban commented at the insider-trading trial to “counter a government claim that he broke a secrecy vow in 2004 when he unloaded his shares in a Canadian Internet company.”
Cuban’s lawyer, Thomas Melsheimer is taking the opportunity to offer details that showed that Mark didn’t just sell his stocks because of the possible losses that would have been incurred. He is showing how from the get go Mark Cuban had “various concerns about Mamma.com, and didn’t sell his shares simple because he learned about a private stock offering that would lower the value of his shares.”
Mark Cuban understood there were connections between the Canadian Internet company Mamma.com and a convicted perpetuator of securities exchange fraud, or a “stock swindler,” Irving Kott. Cuban’s lawyer, Mr. Melsheimer showed the court emails that showed that Cuban didn’t trust Irving Kott, and that Cuban had “raised questions with company officials and had spoken with the FBI and SEC about Kott.” Cuban commented that he felt that the company of which he held shares was “dealing with crooks.” If a person held shares with a company that was doing business with a convict who was in trouble with the law for Securities and exchange fraud, it is logical that the shareholder might sell their shares, in an attempt to get out of a binding business connection with a convicted perpetuator of fraud.
Mark Cuban was testifying Thursday throughout that day and came to the stand again on Monday. So far, the trial is expected to carry on through to next week. The SEC has sued the billionaire owner of the Dallas Mavericks as they felt he used his non-public knowledge in an abuse of his duty under a fiduciary oath to make a sale before others received the company’s public news. Companies report earnings and losses generally on the quarter, or before a merger or acquisition.
The CEO of Mamma.com, Guy Faure said that Cuban “accepted a vow of confidentiality,” while Cuban said that he didn’t really remember all of the small details of that conversation and that he absolutely would not have given up his right to sell his shares when he pleased. Cuban commented, “I just don’t do oral confidentiality agreements, partly because people can later dispute what was agreed upon. So it makes no sense…that I cant sell my stock.”
Image Credit: GoGlobalSports.com & SEC.gov