A government lawyer told jurors that billionaire Dallas Mavericks owner Mark Cuban had an unfair and illegal advantage over other investors when he dumped $7.9 million in shares of an Internet company and then lied about why he sold.
One of Cuban's lawyers answered that the government's case depended on an unreliable witness who refused to testify in person. He accused the Securities and Exchange Commission of twisting evidence and "trying to win at all costs" to prevail in a lawsuit against a high-profile defendant.
Jurors in federal court in Dallas planned to begin deliberations Wednesday morning. The SEC claims that Cuban broke a confidentiality deal in 2004 when he sold his shares in Mamma.com Inc., a Canadian search engine that was trying to compete with larger rivals such as Google Inc. The company's CEO had just told Cuban about a pending stock deal.
The stock offering would give a few private investors the chance to buy shares at a 10 percent discount plus get the right to buy more shares. The offering would hurt existing shareholders including Cuban, who owned 6 percent of Mamma.com, more than anyone else.
"The ordinary investor didn't have any of that information" and couldn't evaluate the importance of the stock deal, SEC lawyer Jan Folena told jurors. "Mr. Cuban could ... it took him one minute to sell everything he owned."
Folena said that Cuban "didn't play by the rules, he wasn't fair, his trade was downright illegal." Cuban's side argued, however, that there was nothing secret about the stock offering because Mamma.com was pitching it to institutional investors and it was mentioned on an Internet chat board frequented by investors.
The SEC wants Cuban to give up $750,000 in losses that he avoided by selling his Mamma.com shares when he did, and that he also pay a civil penalty. The Internet tycoon and regular on ABC's "Shark Tank" doesn't face criminal charges.
After a three-week trial in Dallas, the case could boil down to Cuban's word against that of the Mamma.com CEO, Guy Faure, who testified by video that Cuban knew the stock details were confidential and was angry that he couldn't legally sell his shares because he had been given insider information. "`Now I'm screwed. I can't sell."' Cuban said -- according to Faure.
Cuban attorney Thomas Melsheimer said Cuban never said those words. He tried hard to tear down the testimony of Faure, pointing out repeatedly that the CEO declined to come to Dallas. Instead, jurors saw him in a video recorded in November 2011. Faure "didn't want to look you in the eye," the lawyer told jurors.
During the trial, Cuban testified that he never agreed to keep information about Mamma.com's stock deal private or refrain from selling his shares, which he did for $7.9 million before the company announced the private stock offering.
On Tuesday, Melsheimer played an excerpt from Faure's video in which the CEO said he couldn't recall exactly how Cuban agreed to confidentiality but that he said something like "uh huh, go ahead."
"You're going to base a finding for the government on that testimony, from that witness, who won't even show up?" Melsheimer said.
Melsheimer said that Faure changed his recollection of Cuban's purported agreement to confidentiality a few days after the SEC dropped an investigation into Mamma.com. He suggested that the SEC ended its Mamma.com investigation "right when they thought they had a bigger fish on the line."
Folena reacted angrily at the suggestions that the SEC acted improperly or that Faure lied to curry favor with investigators.
Folena also bristled that during his long closing argument, Melsheimer never referred to her by name, only repeatedly as "she." There are seven women and two men on the jury. A third male juror was excused due to illness. The case is being handled by U.S. District Judge Sidney Fitzwater.