The U.S. Securities and Exchange Commission's allegation of insider trading against Dallas Mavericks owner Mark Cuban could stall the billionaire’s bid for the Chicago Cubs.
So says Phillip Stern, an attorney with the Chicago-based law firm of Neal, Gerber & Eisenberg LLP. The civil lawsuit filed against Cuban in federal district court in Dallas could impact the deal for the Milwaukee Brewers' rival to the extent that it causes parties involved in the negotiations to question the person’s integrity, he said.
Stern, who spent 10 years with the Securities and Exchange Commission, says the allegation against Cuban is particularly sensitive since he's dealing with an image-conscious professional sports league.
The agency alleges that in June 2004 Cuban sold 600,000 shares of a Canadian Internet search engine called Mamma.com Inc. based on information about an impending stock deal that hadn’t been made public. Cuban avoided a loss of more than $750,000 by selling his Mamma.com shares before the company’s stock offering, the SEC alleges. Cuban liquidated his stake in the company less than four hours after he was told about the offering, the complaint charges.
Stern said the $750,000 value of the alleged offense is significant enough for the SEC to investigate, adding: “Market integrity is important to the SEC. I’ve been involved in cases as low as $3,000.”
“His view was that he was not aware that the information was confidential and was not aware of it,” Stern said of Cuban. “If he can demonstrate that he did not have reason to believe the information was nonpublic or that it was not permissible for him to trade on that information, he could win the case.”
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