SEC suit endangers Cuban’s Cubs pursuit
By Ann Saphir
Published: Nov. 17, 2008
(Crain’s) — Charges that Dallas Mavericks owner Mark Cuban engaged in insider trading, allegedly using confidential information on a stock sale to avoid more than $750,000 in losses, could strike him out of the running to buy the Chicago Cubs.
The Securities and Exchange Commission filed a civil lawsuit against Mr. Cuban on Monday in federal court in Dallas. The SEC says that in June 2004, Mr. Cuban was invited to participate in a stock offering by Mamma.com Inc., terms of which he agreed to keep private.
The SEC says Mr. Cuban knew the shares would be sold below their market price and a few hours after receiving the information told his broker to sell all shares in the search-engine company.
In a statement on his blog, Mr. Cuban called the government’s claims “false” and without merit and vowed to fight them.
The accusation could hurt Mr. Cuban’s chances as bids for the Cubs approach a Nov. 26 deadline, some observers say. Mr. Cuban reportedly already faced an uphill battle for the approval he would need from two-thirds of the current Major League Baseball owners, in part because of his bombastic style.
The insider-trading complaint “could very well drive a stake into the heart of his attempts to acquire the franchise,” says Frank Murtha, a sports consultant who also teaches at Northwestern University. “It will probably give Major League Baseball owners pause, or an additional excuse or reason not to approve him in an ownership capacity.”
The complaint also could make it more difficult for Mr. Cuban to raise money from partners, who might be hesitant to back someone accused of fraud, Mr. Murtha says.
Still, at least one analyst said Mr. Cuban should not be counted out. Mr. Cuban is one of five bidders in the final round of Tribune Co.’s Cubs auction, and the media company may be loathe to eliminate him on the basis of the complaint, says Michael Rapkoch, president, of Dallas-based Sports Value Consulting.
“Just because you are accused or charged doesn’t mean you did something wrong,” Mr. Rapkoch says. “Let’s see how he responds to it. Let’s not jump on Mark too much.”
“This matter, which has been pending before the commission for nearly two years, has no merit and is a product of gross abuse of prosecutorial discretion,” Mr. Cuban said on his blog. “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. The government’s claims are false and they will be proven to be so.”