© 2014 The Texas Lawbook.
By Natalie Posgate
Staff Writer for The Texas Lawbook
(January 29) – U.S. Securities & Exchange Commission lawyer Jan Folena approached Mark Cuban at the end of his insider trading trial to congratulate him on the win.
“I want you to know that we’re just doing our jobs,” Folena said. “This is just business; it’s not personal.”
The Dallas billionaire’s reply, which he has since repeated to various media, was it is personal.
“When you put somebody on the stand and accuse them of being a liar, it’s personal,” he said during the press conference that followed the Oct. 16, 2013 jury trial verdict that ruled in his favor.
“When you take all these years of my life and try to prove a point, it’s personal.”
Cuban is now showing just how personally he took his experience by starting a new business venture that involves publicizing SEC transcripts.
Cuban, in an email, said that as he reads about SEC cases that he finds interesting, he will purchase them and post them on his blog. As of now, he says the service is free.
“I think the transparency will keep the SEC honest and in the future help people who have to decide how to engage the SEC in civil litigation,” Cuban said.
Cuban launched his new venture last week with a blog post about the SEC v. Ladislav “Larry” Schvacho case, which was dismissed earlier this month by a federal judge in Georgia. The SEC alleged that Schvacho – a close friend of a CEO of a Houston employment services company – gained $511,000 in illicit trading profits when he overheard his friend’s phone calls with other company executives regarding an upcoming acquisition of the company.
U.S. District Judge William Duffey said because the CEO unintentionally provided Schvacho with inside information and because he did not know Schvacho traded on his company’s stock (Comsys IT Partners, Inc.), the SEC could not prove its misappropriation theory.
To emphasize his perceived incompetency of SEC lawyers, Cuban highlights a particular scene from the trial in which an SEC lawyer gets chastised from Judge Duffey after making a mistake.
“I realize that it’s not just SEC lawyers that make mistakes and get heat from a judge. But I firmly believe that any lawyer working for a U.S. Government agency must be held to a higher standard,” Cuban wrote. “Whether civil or criminal, when a lawyer doesn’t do their homework, or wings it, or takes chances, or doesn’t care about justice, they risk the life, livelihood, reputation and more of the person(s) they are accusing.”
The SEC filed a lawsuit against Cuban in 2008 claiming he engaged in insider trading when he sold his 6 percent stake in Mamma.com based off of material, non-public information he received from Mamma.com CEO Guy Fauré, thus avoiding more than $750,000 in losses.
Cuban argued throughout the three-week federal trial that the information he received was not confidential, that he made no commitment to keep it confidential and that he made no agreement to not sell based on the information he received.
The jury agreed with Cuban, clearing him of all insider trading charges.
Cuban told The Washington Post in November that he was trying to get a face-to-face meeting with SEC chairman Mary Jo White to discuss how the SEC could improve its work. He said the agency measures success by its courtroom wins and losses without assessing whether these legal battles boost investor confidence or improve market fairness.
Cuban told The Texas Lawbook in his email that nothing has progressed with his wishes.
He pointed out in his blog post that he thinks it’s a huge mistake that the SEC has made the conscious decision to regulate through litigation, because no one truly understands what is and is not legal when it comes to insider trading.
“They realize that when you combine this legal confusion with the authority and unlimited resources of the SEC, it is incredibly easy for them to bully and intimidate individuals and companies into settling their cases,” Cuban wrote.
Cuban said at the end of the trial that he felt fortunate to have the resources to fight the SEC in court, since most do not have that option.
“Had I not won, then their (SEC lawyers Folena and Christian Schultz) actions and misdeeds would be a burden that I would have to live with, as would my family, for the rest of our lives,” he wrote. “That is unfair. That is unjust. That is why I am posting these transcripts.”
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