Much talk today of the Mark Cuban case, the internet entrepreneur turned basketball team-owner being charged with insider trading by the SEC. What seemed like a basic insider trading case is now being depicted as something that resembles Cold War-style McCarthyism — or maybe we’re reading too much into Cuban’s surname?
Most notably, Floyd Norris at the New York Times and Yves Smith at Naked Capitalism think the SEC, presumably with the US government’s backing, may be “out to get” Cuban for a couple of things, not least for his part in distributing a 2005 film called “Loose Change,” alleging the Sept 11 attacks were an “inside job.”
Smith also points to Cuban’s recent campaign for more transparency on the bailout (see for instance, this entry at Cuban’s blog).
Normally I’d dismiss that sort of thinking as paranoid, except this reader has been very close to the bailout process, not merely on a first name basis with some of the names you saw in the paper during key initiatives, but actively advising them. My take is that based on previous conduct of this Administration, he thinks it is quite plausible that this move is retaliation.
Cuban himself, however, seems to suggest another political issue may have provoked the payback. This from the latest entry on his blog:
This matter, which has been pending before the Commission for nearly two years, has no merit and is a product of gross abuse of prosecutorial discretion. Mr. Cuban intends to contest the allegations and to demonstrate that the Commission’s claims are infected by the misconduct of the staff of its Enforcement Division.
The staff in question being SEC lawyer Jeffrey B. Norris, by all accounts. Norris, based in the SEC’s Fort Worth regional office, apparently sent an e-mail to Cuban in 2007 — around the time the investigation began. Floyd Norris has the full copy, but here’s the start of it:
From: Norris, Jeffrey B. [mailto:NorrisJ@SEC.GOV]
Sent: Saturday, May 05, 2007 2:27 PM
To: Mark Cuban
Cc: Cox, Christopher
Subject: RE: “Lose Change”
I AM SHARING THIS WITH CHAIRMAN COX. NEITHER HE NOR THE COMMISSION ENDORSE MY OPINIONS, BUT IN LIGHT OF YOUR THREAT, I THOUGHT SHOULD SEND THIS TO HIM.
Mark:
If this upsets you, I wonder how George Bush feels. I assume that Mr. Cox would view your involvement with “Loose Change” much as I do. After all, he served his country as a Republican Congressman from Orange County for nearly 20 years and was appointed by President Bush. If you feel like sharing my thoughts with Chairman Cox, be my guest…
While an SEC spokesman told the NYT’s Floyd Norris that Jeffrey Norris (how confusing!) had no connection to the insider trading case against Cuban, which was conducted from the Washington office, the email doesn’t exactly make a good case for SEC impartiality. SEC head Chris Cox, who apparently has never met Jeffrey Norris, also recused himself from the Commission vote to file the case against Cuban to “avoid any potential appearance issues,” the SEC spokesman said.
The insider trading charges by all account, seem fairly straightforward, though we have yet to hear Cuban’s full account of his defence. Given however, the rather selective nature of SEC insider trading cases, it’s inevitable that questions will arise. We leave it to (Floyd) Norris:
As it is, there appears to be no question about when Mr. Cuban sold the stock. The S.E.C. cites phone company records and company memos about the timing and content of the call. If those memos were accurate, it appears that Mr. Cuban knew he had a duty not to sell until the information about the offering was made public.
But even if all that is true, the Norris e-mail, sent from an S.E.C. e-mail address, indicates the commission has a lawyer with, at best, very poor judgment.
Related links:
More to the Mark Cuban insider trading indictment than meets the eye – Naked Capitalism
Insider trading, or political persectution – Floyd Norris, NYT
Mark Cuban is charged with insider trading – NYT
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