SEC's Mark Cuban Insider Trading Allegations (Details)

Here is the text from the SEC's "statement of fact" in its allegation of insider trading by Mark Cuban. If the SEC's reporting of the facts is true and complete, it certainly appears that Mark traded while in possession of material non-public information. According to John Carney, our resident securities attorney, to have committed insider trading, Mark also has to have broken a "duty of confidentiality." Based on the way the SEC has told the story, it appears that this condition of the charge has been satisfied as well.

STATEMENT OF FACTS

10. In March 2004, Cuban acquired 600,000 shares of Mamma.com, a 6.3% stake in the company. After his acquisition, the company's chief executive officer and president ("the CEO") was Cuban's primary point of contact at Mamma.com.

11. During Spring 2004, Merriman Curhan Ford & Co. ("Merriman"), an investment
bank, suggested that Mamma.com should consider raising capital through a private placement
known as a PIPE ("private investment in public equity") offering. After consideration, the
company decided to proceed with the PIPE and engaged Merriman to serve as the placement
agent.

12. At the end of June 2004, as the PIPE progressed toward closing, Mamma.com, at
Merriman's suggestion, decided to invite Cuban, the company's then-largest known shareholder,
to participate in the PIPE. The CEO was instructed to contact Cuban and to preface the
conversation by informing Cuban that he had confidential information to convey to him in order
to make sure that Cuban understood -before the information was conveyed to him -that he
would have to keep the information confidential.

13. On June 28,2004, the CEO sent an email message to Cuban titled "Call me pls,"
in which he asked Cuban to call him "ASAP" and provided both his cellular and office telephone numbers. Cuban called four minutes later from the American Airlines Center in Dallas, home of
the NBAs Dallas Mavericks, and spoke to the CEO for eight minutes and thirty-five seconds.

14. The CEO prefaced the call by informing Cuban that he had confidential
information to convey to him, and Cuban agreed that he would keep whatever information the
CEO intended to share with him confidential. The CEO, in reliance on Cuban's agreement to
keep the information confidential, proceeded to tell Cuban about the PIPE offering. Cuban
became very upset and angry during the conversation, and said, among other things, that he did
not like PIPES because they dilute the existing shareholders. At the end of the call, Cuban told
the CEO "Well, now I'm screwed. I can't sell."

15. After speaking to Cuban, the CEO told the company's then-executive chairman
about his conversation with Cuban, including the fact that Cuban was very upset and angry about
the PIPE. Shortly thereafter, the executive chairman sent an email to the other Mamma.com
board members updating them on various PIPE-related items, including the fact that the CEO had
spoken to Cuban:

Today, after much discussion, [the CEO] spoke to Mark Cuban about this equity
raise and whether or not he would be interested in participating. As anticipated he
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 equity) but then asked to see
the terms and conditions which we have arranged for him to receive from one of the participating investor groups with which he has dealt in the past.

16. In reliance on Cuban's acceptance of a duty of confidentiality and his
acknowledgement that he could not sell until after the public announcement, the CEO, several ,
hours after their conversation, sent Cuban a follow-up email in which he wrote: "If you want
more details about the private placement please contact .. . [Merriman]." In his email, the CEO
provided the Merriman sales representative's telephone number.

17. Using that telephone number, Cuban called the Merriman sales representative
later that afternoon and spoke to him for eight minutes about the PIPE. During that call, the
salesman supplied Cuban with additional confidential details about the PIPE. In response to
Cuban's questions, the salesman told him that the PIPE was being sold at a discount to the
market price and that the offering included other incentives for the PIPE investors. Cuban was
very upset and angry about the PIPE during the call.

18. One minute after hanging up with the Merriman sales representative, Cuban called
his broker in Dallas and told the broker to sell his entire 600,000 share Mamma.com position.
He told the broker "sell what you can tonight and just get me out the next day."

19. During afier-hours trading on June 28,2004, Cuban sold 10,000 of his 600,000
Mamma.com shares at an average cost per share of $13.499

20. The following morning, June 29,2004, Mamma.com's executive chairman sent another email to the board. He wrote that "we did speak to Mark Cuban ([the CEO] and, subsequently, our investment banker) to find out if he had any interest in participating to the extent of maintaining his interest. His answers were: he would not invest, he does not want the company to make acquisitions, he will sell his shares which he can not do until after we announce."

21. On June 23,2004, Cuban sold his remaining 590,000 Marnma.com shares during
regular trading at an average cost per share of $13.2937.

22. On June 29,2004, at 6:00 p.m. after the markets had closed, Marnma.com
publicly announced the PIPE offering.

23. On June 30,2004, the first trading day following the public announcement,
trading in Mamma.com opened at $1 1.89 -down $1.215, or 9.3%, from the June 29,2004
closing price of $13.105. The stock price on June 30,2004 ultimately closed at $1 1.99, down
$1.1 15, or 8.5%, from the June 29,2004 closing price. Mamma.com continued to decline over
the next week, closing at $8.00 on July 8,2004 (down 39% from the June 29,2004 closing
price).

24. By selling his Mamma.com shares prior to the public announcement of the PIPE,
Cuban avoided losses in excess of $750,000.

25. Cuban later publicly stated that he had sold his Mamma.com shares because the
company was conducting a PIPE, which issued shares at a discount to the prevailing market price
and also would have caused his ownership position to be diluted. Cuban never disclosed to
Mamma.com that he was going to sell his shares prior to the public announcement of the PIPE.
26. Cuban sold his Mamma.com securities on the basis of material, non-public
information he received from the CEO, and, subsequently, from the Merriman sales
representative. Cuban knew or was reckless in not knowing that he had received material, non-
public information from Mamma.com and that he breached a duty of trust or confidence that he
owed to Mamma.com when he sold on the basis of that information.

27. As a result of the conduct described herein, Cuban violated Section 17(a) of the
Securities Act and Section 10(b) of the Exchange Act and Rule lob-5 thereunder.