by wildcherry on Monday, November 17th, 2008 | News, Sports

SAN FRANCISCO (MarketWatch) — High-profile billionaire Mark Cuban was charged Monday with insider trading by the Securities and Exchange Commission after he allegedly sold shares of an Internet search company based on non-public information, sparing himself about $750,000 in losses.

WASHINGTON (AFP) — Mark Cuban, the controversial owner of the National Basketball Association’s Dallas Mavericks, denied insider trading charges that were filed Monday by the Securities and Exchange Commission (SEC).

The Texas billionaire businessman was charged with selling 600,000 shares of stock from an Internet search engine company, Mamma.com Incorporated(read below about Mamma.com), based on non-public information regarding an impending stock offering by the firm.

“The government’s claims are false and they will be proven to be so,” Cuban responded in a statement posted on his blog on the Mavericks’ web site.

See Mark Cuban’s blog here

“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.”

In a note atop the statement Cuban added, “Wish I could say more, but I will have to leave it to this and let the judicial process do its job.”

The SEC complaint filed in US District Court for northern Texas alleges that in June of 2004, Mamma.com invited Cuban to participate in the stock offering after he agreed to keep the information confidential.

Cuban knew the offering would be conducted at a discount to prevailing market price and would hurt the value for shareholders, the complaint claims, saying Cuban dumped his shares and avoid 750,000 dollars in losses.

“Insider trading cases are a high priority for the Commission,” said SEC enforcement division director Linda Chatman Thomsen.

“This case demonstrates yet again that the Commission will aggressively pursue illegal insider trading whenever it occurs.”

Cuban’s response statement, issued through his attorneys, said the charges had been pending before the SEC for nearly two years, had no merit and were “a product of gross abuse of prosecutorial discretion.”

In saying Cuban will fight the allegations, the response said Cuban hops to show the SEC claims are “infected by the misconduct of the staff of its Enforcement Division.”

Cuban, 50, made his money through Internet and technology companies and in 2000 purchased the Mavericks, becoming an outspoken critic of some aspects of the league and billing himself as his team’s top fan.

Over sporting a team T-shirt and a seat near the court for Mavericks home games, Cuban has been fined more than 1.5 million dollars by the NBA for statements critical of the league and its referees.

The charges also come as Cuban was seen as a top candidate to purchase Major League Baseball’s Chicago Cubs.

He entered the bidding for the storied sports franchise in July and was in position to win the financial fight, reportedly with the top bid at 1.3 billion dollars.

The charges, if proven true, would give baseball owners a reason to dump Cuban’s bid even if it were the highest.

Before the SEC charges, the Chicago Sun-Times quoted an anonymous source as saying Cuban had “zero chance” of being approved as owner of the Cubs.

The Chicago Tribune has reported that more detailed bids on how purchases of the Cubs would be financed are due next week.

The SEC claims that within hours of learning of the plan, Cuban told his broker to sell his entire stake in Mamma.com.

Once the offer was announced, Mamma.com stock opened at 11.89 dollars, down 9.3 percent from where it closed the day before, 13.10.

For violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, the SEC wants to permanently enjoin Cuban from future violations of the federal securities laws, impose a financial penalty and force Cuban to surrender the money he saved with the move.

“It is fundamentally unfair for someone to use access to non-public information to improperly gain an edge on the market,” said Scott Friestad, SEC enforcement division deputy director.

“Mamma.com entrusted Mr. Cuban with non-public information after he promised to keep the information confidential. Less than four hours later, Mr. Cuban betrayed that trust by placing an order to sell all of his shares.”

What is Mamma.com

Mamma.com is a Canadian search engine that merged with Copernic Technologies, which also offers search software and online advertising services, in December 2005. It now trades under Copernic’s ticker, CNIC.

It received 669,000 unique visits in September, down 66% from the 2 million it got a year earlier, according to comScore.

Like many tech companies of late, Copernic has been streamlining operations in the weak economy. Last week it said it would close its Montreal office and that its marketing VP wouldn’t be staying on past the end of the year.

Its third-quarter loss narrowed to $621,677 from $974,716 a year ago, though its revenue shrank 10% to $1.7 million over the same period.

Mr. Cuban has mentioned Mamma.com as far back as 2004, when he blogged about investing in it despite its obscurity.

“I invested in mamma.com for the same reason I invested in Netidentity.com back when it was known as mailbank.com. I love businesses with low overhead, that don’t need to be technology leaders to succeed, that generate cash that they can put in the bank, and at some point, hopefully payout to shareholders. I think mamma.com has that potential,” he wrote. “It’s not Google or Yahoo, nor will it be a top 5 search engine anytime soon. But it is a good metasearch tool that I use and have used. Google and Yahoo have become carbon copies of each other, and for me, other than usenet and news searches, it’s too big. I like the way Mamma.com organizes websearches, and I use it for picture searches.”

A year later, he wrote that he’d changed his mind because of financing concerns: “Im glad I sold my
stock.”
Source:WSJ

Tags: copernic inc, mama, mama.com, mamma.com, mamma.com stock, marc cuban, mark cuban, mark cuban insider trading, momma, momma.com