At issue is whether the 50-year-old entrepreneur improperly sold shares of Mamma.com Inc. in 2004 after being told by the company's chief executive about its plans for a private share offering. The SEC argues that Cuban avoided more than $750,000 in losses by selling shares in the company, which is now called Copernic Inc.
Cuban, who owned six percent of the stock, has denied he was an insider. According to the Associated Press, several prominent legal experts agree with him. Alan Bromberg, a law professor at Southern Methodist University who researched the case at the request of Cuban's attorney, told the wire service that he believed the agency had gone too far. He and other professors were not compensated for their work. Other experts believe that the SEC is on solid ground.
Nonetheless, Cuban is fighting the SEC tooth and nail. Earlier this week, he filed suit against the SEC accusing the agency of illegally withholding documents from him related to the case. Bloomberg News notes that the Dallas-based businessman wants "records of any investigations of Copernic Inc., formerly known as Mamma.com, HDNet, his National Basketball Association team and other entities he owns or controls. It also seeks records of any internal probes of SEC Trial Counsel Jeffrey Norris related to his interactions with Cuban."
Though I am no lawyer, I am predicting that the courts will call a "foul" on the NBA's most controversial owner for this early reach. The Freedom of Information Act allows the government to withhold sensitive information from ongoing legal proceedings. Essentially, Cuban wants to see everything in the government's playbook on top of what he already is entitled to under discovery. He may have a stronger case on whether he is an insider, but that may take years to prove and wind up costing millions in legal fees.
Unlike NBA with whom he frequently argues, the SEC has the power to make Cuban's life miserable beyond levying fines which will always be chump change to a man of his means. My prediction is that the owner of the Dallas Mavericks will settle this case without admitting wrongdoing and pay a small fine because it's the least expensive, and least exhausting, option available.