DALLAS (AP) — The insider-trading lawsuit against Mark Cuban will continue after a federal judge turned down the billionaire Dallas Mavericks owner's attempt to dismiss the government's case as unproven.
U.S. District Court Judge Sidney Fitzwater's ruling late Monday means that the case is likely to be decided by a jury of seven women and three men who heard Cuban testify for two days.
The Securities and Exchange Commission charges that Cuban violated a confidentiality agreement and unloaded his shares in a Canadian search-engine company in 2004 after learning that the company planned a stock offering that would reduce the value of his $7.5 million stake. The government says Cuban avoided $750,000 in losses by selling his shares before the offering was announced.
Much of Cuban's testimony Monday repeated what he said last week — that he never agreed to keep information about the offer confidential and saw no reason why he couldn't sell his shares in Mamma.com Inc.
Cuban detailed his concern over connections between the company and a convicted stock swindler, Irving Kott. Cuban's lawyer offered emails indicating that Cuban had raised questions about Kott with company officials.
The Kott story matters because Cuban's version is that he had many reasons for selling the stock. He testified that FBI agents spoke to him in April 2004 about Kott and Mamma.com, and he confronted company officials about it.
The SEC, however, argues that no matter what Cuban thought of Kott, he sold his shares only after learning privately about Mamma.com's plan to issue additional shares in late June 2004. He sold all his shares within two days of learning about the stock offer.
"We're not saying he fabricated his concern about Kott," SEC lawyer Jan Folena said in court. "We're saying his concerns about Kott are not the reason he sold his stock. There's a difference."
The SEC called Cuban as a witness, and rested its case when he was done testifying, a move that seemed to catch courtroom observers off-guard. That's when Cuban's lawyer asked Fitzwater to dismiss the case, saying the SEC had failed to prove insider trading. The judge had dismissed the case in 2009, only to be overturned by an appeals court. After he rejected Cuban's motion, his lawyers began their case by calling Cuban's longtime stockbroker. The trial is expected to run into next week.
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