A Maverick Exchange: The Emails Between Mark Cuban and Jeffrey Norris

[WSJ_law_blog]

By now you’ve probably heard about the insider trading charges filed by the Securities and Exchange Commission against Dallas Mavericks owner Mark Cuban. (Click herefor the WSJ Page One story.)

As a recap, the SEC alleges that in 2004 Cuban was informed by the chief executive of Mamma.com, a company in which Cuban held a substantial amount of stock, that the company would raise money by issuing low-priced shares, a move that would probably hurt that value of Cuban’s shares. Cuban then allegedly sold his stake in order to avoid getting hit by the stock price drop after the low-priced share offering became public.

The key question in this case, as it turns out, is whether Cuban agreed that the information the CEO gave him would be confidential. Lawyers have told us that if he did, he wouldn’t be able to make securities trades based on the information. If Cuban’s assertion is correct, and the SEC fails to show he agreed to keep the information confidential, Cuban could win, says David Seide of Curtis Mallet-Prevost.

In its complaint, the SEC provides two examples that allegedly shows he did. First, the former CEO said Cuban agreed to keep the information confidential. Second, the company’s executive chairman sent an email to board members recapping that conversation, and wrote: “As anticipated [Cuban] initially ‘flew off the handle,’ and said he would sell his shares (recognizing that he was not able to do anything until we announce the [offering])….”

Cuban’s lawyers say he made no such promise, and today the Maverick posted what appears to be supporting evidence on his blog. It’s a transcript of an interview one of his lawyers, Chris Clark of Dewey & LeBoeuf, did with former Mamma.com CEO Guy Faure, in connection with the case:

Clark: We spoke earlier about you . . . telling Mr. Cuban in words or substance : “I have confidential information for you”.

Faure: Right.

Clark: Do you recall anything Mr. Cuban said in response or reply to that statement by you?

Faure: No, I do not.

“The SEC knows this-they have the transcript, yet they brought the case anyway,” Cuban writes in his post. He adds: “Why did the SEC end their multi-year investigation of Mamma.com Inc. for alleged securities laws violations days before interviewing present and former Mamma.com Inc. executives about this matter? Was the timing a coincidence? We think not.”

Scott Friestad, deputy director of the SEC’s enforcement division, said, “We’re not going to comment on anything Mr. Cuban or his lawyers have to say on Mr. Cuban’s blog and we look forward to presenting our case in court.”

A lawyer for Faure declined to comment.

[WSJ_law_blog]

We’ve told you a bit already about the Securities and Exchange Commission’s case against Dallas Mavericks owner Mark Cuban (pictured, right). (See LB coverage here and here.)

Now comes the strange tale of Jeffrey Norris, trial counsel for the SEC in Fort Worth, Texas. The Law Blog has reviewed a long series of email exchanges in 2007 between Cuban and Norris, a Mavericks fan. Their exchange began after news surfaced that a film company co-owned by Cuban was discussed as a possible distributor of “Loose Change,” a movie suggesting the U.S. government was involved in the 9/11 terrorist attacks. (The company, Magnolia, ended up not distributing the film.)

What happened: In March 2007, Norris began sending strongly-worded emails to Cuban, whose personal email address is public. In sometimes lengthy emails, Norris consistently defended President Bush to Cuban and, along the way, called Cuban unpatriotic. “Either you are really an anti-American ideologue or your allegiance to making money is significantly greater than your dedication to your country,” Norris told Cuban. For his part, Cuban said he didn’t personally believe in the film’s content and said Norris was against an “open market of ideas.”

In May 2007, after the Mavericks lost in the first round of the NBA playoffs, Norris posted a comment on a Time.com blog that attempts to be a parody of “Loose Change” and says that Mark Cuban himself “orchestrated the Mavericks’ loss.” Norris then emailed the comment to Cuban.

After calling the blog comment “scary,” Cuban sent an email to Norris and SEC Chairman Christopher Cox, noting that “sending [an] unsolicited email to me, basically accusing me of being a traitor and lacking in patriotism, from your sec email account and during working hours is exactly how taxpayer dollars should be spent.” Cuban added: “I would hate to think that you . . . would enforce laws different for those that ‘otherwise find it difficult to listen.’ ” Norris hit “reply all” and continued to criticize Cuban in full view of Cox. In the end, Norris eventually thanks Cuban for taking the time to “engage in this discussion.”

SEC response: Norris declined to comment to the Law Blog. The SEC told the WSJ on Monday that Norris wasn’t at any time involved in the investigation, and that he is being reviewed for possible disciplinary actions. A spokesman said Cox “has never met the individual who corresponded with Mr. Cuban, nor has he spoken or corresponded with him in any way.” He said Cox recused himself from the vote on whether to bring the insider-trading case against Cuban.

WSJ’s Kara Scannell reported today that lawyers for Cuban sent a letter to the SEC in September 2007 raising the email exchange involving Norris. The SEC responded in a letter that Norris had no role in the investigation and that “political considerations and personal opinions will not have any bearing on any decisions that are made during this investigation.”

Later in 2007, WSJ reports, when the SEC staff was set to recommend filing civil fraud charges against Cuban, Cox didn’t want to take up the case in part because of the email exchanges.

It has yet to be seen whether Cuban and his lawyers will try to introduce these emails at trial. Below are snippets of Norris’ emails. (Click here for the full 20 pages of email exchanges.)

Norris on Cuban’s alleged slander of President Bush:

“Tell me why you want to inspire hat[r]ed of President Bush?”
***
“Trying to present yourself as ‘agnostic’ when it comes to this trash doesn’t absolve you from blame. You are promoting a point of view that is radical and irresponsible. Because of you, and others like you, refuse to be discriminating, people who hate this country and hate this President have the opportunity to disseminate the worst kinds of lies.”

On comparing Cuban to others:

Your actions place you in a category of people such as Sean Penn, Michael Moore and Jane Fonda.
***
What you are promoting, and likely profiting from, is akin to someone during WW II disseminating through mass communication a story that Franklin Roosevelt arranged Pearl Harbor and secretly funded Hitler’s invasion of France.
***
When this dialogue is over, you will fade into the background and become just another one of the many people who harm our nation through greed or hatred or apathy or, simply, lack of judgment.

On his disappearing love for the Dallas Mavericks:

“Yesterday, I hoped the Mavericks would win the NBA Championship. Today, I won’t be following the team, but I will be hoping they exit in the first round.” [Norris got his wish.]
***
Next time one of them asks me “Daddy, do we like the Mavericks?”, I will say: “No, honey, we don’t. We hate the Mavericks because the man who owns the team helps very bad people who hate America and hate President Bush. We love the Lakers.”

On SEC Chairman Christopher Cox:

I assume Mr. Cox would view your involvement with “Loose Change” much as I do.
***
I’m sure [Cox] is a Laker fan.

On teaching his own children:

Now, you will have to excuse me. I need to tell the children why we won’t be turning on the Mavericks games anymore….
***
…[Y]ou will be an object lesson. I will direct the attention of my children and say: “That’s Mark Cuban. He owns the Mavericks. I don’t respect him because he helps people who hurt our country and hate President Bush….I don’t think Mark Cuban is an evil man. He just doesn’t care enough about truth to do what is right.”

On Religion:

Someone once told me that I should not criticize people on the left side of the political spectrum because “Jesus was a lefty.” My response was that Jesus . . . valued truth and that is what distinguishes him from the left in America today. Moreover, Jesus is God; people on the left only think they are.

On Cuban’s temper:

I don’t want to “piss you off” any more, because that will only entrench you further in your defense of what I think is a socially irresponsible decision. The danger is elevated with you because you’re a hothead–but that’s part of your charm.

On being busy at the SEC:

I would love to continue this communication. Unfortunately, I have a responsibility to protect investors from fraud and I need to turn to that obligation.