Cuban Says He Was Taken Aback by S.E.C. Charges

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The billionaire Mark Cuban said he refused to be bullied.Credit LM Otero/Associated Press

DALLAS – Mark Cuban, the billionaire owner of the Dallas Mavericks basketball team, testified on Monday that he was cooperating with the Securities and Exchange Commission as early as 2004 in an inquiry into an Internet search engine company and was taken aback when he turned on the news one day in 2008 and heard that the agency was charging him with insider trading.

Defense lawyers put forward e-mails and notes about a telephone call in 2004, including Mr. Cuban’s interactions with the S.E.C., in which Mr. Cuban directly says he planned to sell his stock in the search engine company Mamma.com because the company was planning a private offering. Such an offering was likely to hurt Mamma.com’s stock price and dilute the value of Mr. Cuban’s holdings.

Among the e-mails offered as evidence were those from people affiliated with Mamma.com that suggested Mr. Cuban should forward the news about the private investment.

“I got an e-mail from Guy Fauré,” Mamma.com’s chief executive, “saying I could tell anybody,” Mr. Cuban said. Before he sold his shares, Mr. Cuban was Mamma.com’s largest single shareholder, with 600,000 shares, or a 6.3 percent stake.

Mr. Cuban testified that he also told Charlie McKinney, his broker in June 2004, that “I told Guy that I would sell my stock.” One reason, he said, was because this kind of private investment fund-raiser signaled that this is “a scam in the making.”

The S.E.C. says that Mr. Fauré, in discussing the coming private investment, asked that Mr. Cuban keep the information confidential and that Mr. Cuban agreed.

Asked by his lawyers on Monday whether he was asked to keep the information confidential, Mr. Cuban testified, “Of course not, because I didn’t.” He went on, “It makes no sense that I would say ‘I won’t sell my stock.’ ”

Why, his lawyers asked, had he not settled the case? “I’ve done nothing wrong,” Mr. Cuban replied. “I refuse to be bullied, even if it is by the government.”

Mr. Cuban’s lead lawyer, Thomas Melsheimer, said afterward that “Mr. Cuban has waited a long time to tell his side of the story and he got to do that today.” He told the jury that Mr. Cuban “never hid anything and never agreed to keep anything confidential.”

Mr. Melsheimer noted that Mr. Cuban was recalling details from nine years ago. Mr. Cuban emphasized that he has never agreed, verbally, to keep something confidential in business.

The S.E.C. lawyer, Jan Folena, has said that Mr. Cuban used the confidential information to sell his shares, avoiding $750,000 in losses, while the company’s stock fell 9.3 percent on the day the offering was announced.

If found liable, he faces a fine of about $2 million. Mr. Cuban is worth about $2.5 billion.