The SEC has filed suit against Mark Cuban, alleging he engaged in insider trading in 2004 with mamma.com to avoid a $750,000 loss. At the time, Cuban was the largest shareholder in the company.
On his blog, Cuban denied the allegations, saying "the Commission’s claims are infected by the misconduct of the staff of its Enforcement Division."
Given how little we've heard from the SEC the past few years, save for how its overwhelming lack of enforcement during the financial industry meltdown, this is a curious case. Then again, Cuban "hates to lose," as he says in a separate blog post about the NBA team that he owns. That post immediately precedes his terse post about the SEC suit.
Cuban hates to lose and, as we learned profiling him and the Dallas Mavericks for a case study in "Creating Customer Evangelists," he sometimes struggles with the competing interests of long-term winning thinking and short-sightedness that can erase winning margins.
His long-term winning thinking is showcased in how he converted one of the worst franchises in professional sports to become one of the most valuable. He did so by making the opponents of his team feel just as welcome at the Mavs' arena with a visitors locker room that's as comfortable and well-appointed as his own team's; after all, opposing players may one day join your team. He made it OK for homemade signs to be brought into the arena (a stern no-no of the previous owners), and encouraged crazy fan loyalty by constantly demonstrating his own. He invested heavily in technology for the coaches and players and a statistician, two largely unexplored areas prior to Cuban's investments. He told us back in 2002 how much he admired the Chicago Cubs and the passionate loyalty of its fan, a loyalty cultivated by its honest, "loveable loser" spirit.
On the other hand, during our conversations with him, Cuban talked extensively of his time of being a daytrader prior to buying the Mavs and how he loved shortsellers "because they keep companies honest." Shortsellers, it turns out, have been partially blamed for the demise of a number of financial institutions this year. Cuban also defined ultimate success in business by being summoned to Congress amid accusations of holding a monopoly on an industry. Microsoft, of course, has spent billions paying fines and perhaps billions more in legal fees extracting itself from monopolist charges. It has taken many years to rebuild the goodwill from the damage caused by its previous win-at-all-costs mentality.
No doubt, Cuban will probably surprise a number of people with the way he defends himself against the SEC's charges. Ever since he was kid selling garbage bags door to door, he's been unafraid to win. The question about the mamma.com case, though, did he go too far to avoid losing?
Nothing against the watchdogs at the SEC, but I hope they're wrong.
Update: Cuban has posted a memo from his attorney, who excerpted his "interview" (unclear if it's a deposition) with the former mamma.com CEO. As we might have expected, this will probably evolve into a good example of a high-profile lawsuit first tried in the court of blog-driven public opinion. The stakes are high.
