Mark Cuban charged with insider trading by SEC

November 17, 1:04 PMSports ExaminerPaula Duffy

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Mavericks owner Mark Cuban

This one came as a shocker but I guess it shouldn't have. If Mark Cuban could get through the dot-com meltdown without any hint of a problem I thought he was in the clear. I was wrong.

Cuban has been charged by the Securities and Exchange Commission ("SEC") with insider trading in an effort to avoid stocks losses of three-quarters of a milion dollars in the company mamma.com. Cuban, a holder of more than 6% of the company's stock, was considered an "insider" under SEC rules. That requires confidentiality about non-public information considered material to the company's prospects. In need of an infusion of capital, the company decided to offer a large number of shares to the public in what was called a private investment in public equity ("PIPE") .

That price was below what Cuban had paid. As an insider he was required not to reveal what he knew or trade the stock until the information had been disclosed to the public for further stock sales. He sold all his stock prior to the public offering to avoid losses.

This is the legal problem that Martha Stewart was not charged with after the government investigated sales of ImClone by Stewart and others close to the company. The irony is that she violated federal law when she lied to investigators about her actions and ended up in prison after pleading guilty to obstruction of justice for lying. Have I mentioned this lately: It's the cover-up not the crime that gets more attention?

Cuban has not been criminally charged. The SEC has filed a civil complaint seeking damages and an injunction.

I'm certain we'll hear something from NBA commissioner David Stern on this matter. In true Stern fashion it will more than likely be one of those placeholder statements that mean nothing more than him being aware of the charges and letting the legal process run its course.

Cuban might dodge a bullet with the NBA since the SEC violation is civil rather than criminal in nature.  But then again, with the lack of affection between Stern and Cuban, it might just give David the ability to rile the Dallas Mavericks owner a bit.

In the meantime, I'm sure we'll get a statement from Cuban pretty soon. Check back here for updates as they happen and watch the video of ESPN legal analyst Roger Cossack explaining the facts.