By Jana J. Pruet
DALLAS (Reuters) - Jury deliberations begin on Wednesday to decide whether Dallas Mavericks basketball team owner Mark Cuban engaged in insider trading when he sold his stake in an Internet search firm in June, 2004.
Cuban, 55, estimated by Forbes magazine to have a net worth of $2.5 billion, is accused by the U.S. Securities and Exchange Commission of trading on non-public information when he sold his 600,000 shares - worth $7.9 million - and avoided a $750,000 loss in Internet search company Mamma.com Inc.
Cuban, who rose to prominence before the dot-com crash by selling his company, Broadcast.com, in 1999 to Yahoo Inc for $5.7 billion, has said he did nothing wrong when he sold his 6.3 percent stake in Mamma.com.
Prosecutors argued on Tuesday that Cuban sold his stake soon after learning from Mamma.com Chief Executive Guy Faure that the Montreal-based company was planning a private placement that would dilute his holdings in the company.
Mamma.com shares dropped 9.3 percent on the morning after the offering was announced. By that time, Cuban had already sold his shares.
The SEC is seeking to recoup Cuban's gains and impose fines if the jury rules against Cuban in the civil trial in federal court in Dallas.
"Mr. Cuban knew about information that other investors didn't and he sold before losing a dime," SEC lawyer Jan Folena said in her closing statement.
In addition to his ownership of a professional basketball team, flamboyant billionaire Cuban is one of the stars of the popular television show "Shark Tank" which features financiers including Cuban analyzing and deciding whether to invest in new products presented by entrepreneurs.
Cuban testified during the two-week trial that there were many reasons for selling his shares, including the private placement and Mamma.com's possible association with the late Irving Kott, who Cuban suspected of being a stock swindler.
Cuban's defense lawyers said in closing arguments that investors had been approached to participate in the private placement well before Cuban learned of the deal. This shopping of the deal to potential investors meant that it was already public and there could be no insider trading on the information.
Defense lawyer Thomas Melsheimer likened the situation to students supposedly cheating on a test.
"This is not the case of Mr. Cuban getting the answers before the test. It's like the teacher passing out the answers long before the test," Melsheimer said.
The SEC brought the civil lawsuit against Cuban in November 2008. A judge dismissed the suit in 2009 but an appeals court revived the case the following year. The jury consists of nine members.
The case is SEC v. Cuban, U.S. District Court, Northern District of Texas, No. 08-02050.
(Editing by Greg McCune and Edwina Gibbs)
- Mark Cuban
- insider trading