DALLAS — Mark Cuban is expected to testify Thursday in the government’s insider trading lawsuit against him, which could come down to whether jurors believe the billionaire and Dallas Mavericks owner’s account of a 2004 phone call.
Cuban is likely to say that he never promised to refrain from selling his shares in an Internet company after learning news that would cause their value to fall.
The CEO of the Canadian search-engine company, Guy Faure, says Cuban agreed at the start of the phone call that he would be learning confidential information. When Cuban learned about Mamma.com Inc.’s plan to issue more stock — lowering the value of Cuban’s 6 percent stake — he got angry.
“Now I’m screwed. I can’t sell,” Cuban said, according to Faure, whose testimony was recorded in late 2011 and played Wednesday for the jury in U.S. district court in Dallas.
The Securities and Exchange Commission says the comment is a key admission that Cuban knew he couldn’t trade on inside information. But he went ahead and unloaded his 600,000 shares anyway, before the company publicly announced the stock offering. The SEC says Cuban avoided $750,000 in losses, and it wants him to pay the money back plus a penalty.
The SEC filed a civil lawsuit; Cuban was not charged with a crime.
Cuban says he never uttered the “Now I’m screwed” comment, and his lawyers attacked Faure’s credibility. They played excerpts from his testimony in which he admitted that he didn’t swear other investors to confidentiality, and he was often unable to recall details of conversations with them.
“I don’t recall exact words of all my phone conversations seven years ago,” Faure said.
Also, Judge Sidney Fitzwater let Cuban’s lawyers introduce evidence that they believe suggests that Faure changed his story about Cuban after the SEC closed an investigation into trading in Mamma.com stock. SEC lawyer Jan Folena protested vehemently, saying that Faure would have no chance to rebut the evidence, having already testified by video.
“He is the key witness,” Folena argued to the judge. “It’s his word versus Mark Cuban’s.”