Mark Cuban, the Indiana University alumnus who owns the Dallas Mavericks, said this afternoon that accusations of insider trading leveled against him earlier in the day by the U.S. Securities and Exchange Commission are false.
Cuban said in a statement posted on his Web site, www.blogmaverick.com., that he will contest the allegations, calling them "a product of gross abuse of prosecutorial discretion."
"I am disappointed that the Commission chose to bring this case based upon its Enforcement staff's win-at-any-cost ambitions," Cuban added. "The staff's process was result-oriented, facts be damned. The government's claims are false and they will be proven to be so."
The charge involved a 2004 trade of 600,000 shares of Mamma.com Inc., an Internet search engine company that now is part of Canada-based Copernic Inc., according to a statement on the SEC's Web site.
The commission's complaint, filed in the U.S. District Court for the Northern District of Texas, alleges that in June 2004, Mamma.com invited Cuban to participate in a private stock offering - at a discount to prevailing market prices - after he agreed to keep the information confidential.
Within hours of receiving this information, according to the complaint, Cuban called his broker and instructed him to sell Cuban's entire position in the company. After the offering was publicly announced, Mamma.com's stock price opened at $11.89, down 9.3 percent from the prior day's closing price.
According to the complaint, Cuban avoided losses in excess of $750,000 by selling his stock prior to the public announcement of the offering.
"As we allege in the complaint, Mamma.com entrusted Mr. Cuban with nonpublic 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," Scott W. Friestad, deputy director of the SEC's division of enforcement, said in a statement.
"It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market."
The commission's complaint seeks to permanently enjoin Cuban from future violations of the federal securities laws, disgorgement (with prejudgment interest), and a financial penalty.
Cuban, 50, a Pittsburgh native, earned a business degree from IU in 1981. He became a billionaire in 1999 when he sold his Internet company Broadcast.com for $5 billion to Yahoo!
He bought the Dallas Mavericks basketball team in 2000 and later started the high-definition television network HDNet.