The Billionaire Behind Insider Trading Charges

Nov. 18, 2008— -- Mark Cuban likes the spotlight.

The tech mogul and reality TV star has danced with the stars and upended the movie business.

Now, he's getting another kind of attention, this time from the feds.

The billionaire entrepreneur, self-described "business adrenaline junkie" and outspoken owner of the Dallas Mavericks was accused Monday of insider trading for allegedly using confidential information to avoid more than $750,000 in stock losses.

The Securities and Exchange Commission claims in a civil complaint that Cuban sold all his shares in Mamma.com, an online search company, hours after learning of a planned public stock offering that would undercut the company's share price. Cuban has denied the charges.

"It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market," Scott Friestad, the SEC's deputy enforcement director, said in a statement.

Cuban, 50, a self-made billionaire who made most of his money in the tech business, has cast himself as an outspoken maverick who is not afraid to challenge conventional business wisdom or flout rules of decorum.

He has been fined more than $1 million by the National Basketball Association -- as owner of the Dallas Mavericks, which he bought from Ross Perot in 2000 for $280 million -- for criticizing NBA officials, and other infractions.

He has been known to watch games from the same seat he sat in before he bought the team, dressed in T-shirt and jeans, and to run onto the court at times to yell at referees and other basketball officials. He fired Mavericks head coach Avery Johnson, one of the most successful coaches in the team's history, earlier this year.

"He seems to enjoy taunting figures of authority, such as the commissioner of the NBA and every referee in the league. He knows what he likes to do to have fun," said Lester Munson, who writes about legal issues in sports for ESPN.com and other outlets.

"I think we in sports always viewed him as a kind of ideal owner in that he was a maverick. He cared about his players, he wanted to win and he cared about his fans," Munson said. "Nobody ever looked hard at his money or what he was doing with it."

According to the SEC, Mamma.com's CEO called Cuban in 2004 to invite him to participate in the stock offering, after telling him the information was confidential and that he could not trade on it.

The SEC claims Cuban became "very upset and angry" during the phone call, and ended it by saying, "Well, I'm screwed. I can't sell."

Within hours, Cuban allegedly called his broker and told him to sell all his 6 percent ownership stake in the company, the SEC says.

The SEC is seeking a civil court judgment finding that Cuban violated the antifraud provisions of the federal securities laws, an unspecified fine and restitution of the losses Cuban allegedly avoided. Phillip Stern, a former SEC lawyer who now works at Neal, Gerber and Eisenberg in Chicago, said the SEC usually asks for a penalty equal to the amount of avoided losses.

Cuban defended himself in a statement posted on his Web site: "I am disappointed that the Commission chose to bring this case based upon its Enforcement staff's win-at-any-cost ambitions," the statement said. "The staff's process was result-oriented, facts be damned. The government's claims are false and they will be proven to be so."

Now one of the richest men in the country -- Forbes estimated his net worth at $2.6 billion -- Cuban started MicroSolutions, which he sold in 1990 to Compuserve for a reported $3 million.

In an interview earlier this year with the Web site TechCrunch, Cuban said he "retired" after he sold the company, when he was 30. "My goal was to drink with as many people in as many countries as possible. I sold a company and all I wanted was a lifetime pass for American Airlines. They had them for $125,000 for two people. I used to go into bars and ask women if they wanted to go on trips," he said.

Cuban soon started another business, broadcast.com, which put sports games online. He sold the company to Yahoo! in 1999 for $5.7 billion. The next year, he bought the Mavericks.

"Once I didn't have to pay the bills," Cuban told TechCrunch, "the best challenges were to come up with stuff that people said couldn't be done."

Cuban co-founded HDNet, the high definition television network, and has an ownership stake in two movie studios, a distribution company and Landmark Theaters, the largest chain of movie theaters that show independent films. His companies have produced and distributed films, such as "Good Night, and Good Luck" and the documentary "Enron: The Smartest Guys in the Room."

He challenged the movie business when he proposed releasing films to theaters, DVD and television in the same day.

He reportedly also harbors ambitions to buy the Chicago Cubs, though that plan could be complicated by the insider trading allegations.

"What the allegations go to is the person's integrity more than anything else," said Stern. "If somebody looking at it believes he may have engaged in this kind of conduct, they are going to need to decide whether he is the kind of person they would want to own a major league franchise."

Since selling broadcast.com, Cuban has appeared on his own reality television show, "The Benefactor," which was pulled after six episodes. He has also been a contestant on ABC's "Dancing With the Stars," but was eliminated before the finals. In 2006, he started sharesleuth.com, a Web site dedicated to investigating stock fraud.

"He seems to think that he is somehow exempt from the laws that govern the trading of securities in this country," said Munson. "I thought of him being a guy having some fun. This kind of shows the kind of avarice that I didn't think was part of Mark Cuban."