Cuban denies pledge to keep tip confidential

The Securities and Exchange Commission’s lawsuit, filed Monday in federal court in Dallas, said Cuban broke the vow after speaking by phone with Mamma.com Inc.’s chief executive officer in 2004. Cuban became angry after learning in the call that the company planned to sell shares below the trading price, crimping his investment, the SEC said in its lawsuit. That same day, he arranged the sale of his 6.3 percent stake, it said.

“There was no agreement to keep information confidential,” Cuban said Tuesday on his blog. When his lawyers questioned Mamma.com’s former CEO Guy Faure during the government probe, Faure said he had no recollection of Cuban’s comments on the call, according to the statement. “The SEC knows this — they have the transcript, yet they brought the case anyway. Why?” Cuban said.

Cuban is the most prominent U.S. individual targeted for alleged insider trading since the SEC sued Martha Stewart, founder of Martha Stewart Living Omnimedia Inc., in 2003. The SEC’s announcement of the case prompted Cuban to accuse the agency of a “gross abuse of prosecutorial discretion,” and vow to fight.

“We don’t have any comment on his blogs or what his attorneys are saying and we look forward to presenting our case in court,” Scott Friestad, deputy director of the SEC’s enforcement division, said in an interview Tuesday. He declined to comment on Cuban’s assertions.

The agency’s lawsuit says Cuban in late June 2004 spoke by telephone to Mamma.com’s chief executive officer and promised to keep the content of the conversation secret. During the almost nine minute call, Cuban learned the company planned a private investment in public equity offering, known as a PIPE.

“Cuban became very upset and angry during the conversation, and said, among other things, that he did not like PIPEs because they dilute the existing shareholders,” driving down the value of their stock, the SEC complaint said. At the end of the call, Cuban told the CEO, “Well, now I’m screwed. I can’t sell,” the SEC said.

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