While Cuban, in his own trial testimony, didn’t dispute the two had spoken, he said he could not recall specific details of the discussion and that he’d not have made a verbal promise of confidentiality.
He also denied that the PIPE alone motivated the liquidation of his shares, which was completed within a day of his conversation with Faure and prior to the private placement.
Cuban said he was concerned the company was involved with stock promoter Irving Kott who, a month earlier, had pleaded guilty to charges he concealed his ownership interest in a discount brokerage firm.
The Kott conviction influenced his thoughts about the PIPE, he said.
“It was an indication to me that the company was a scam,” Cuban said of Mamma.com.
In addition to Faure, the SEC presented the testimony of Mamma.com Chairman David Goldman, who told the court the company’s board was concerned about how it’s biggest shareholder would respond to being told of the PIPE plan.
The board was worried Cuban might “flog us on his blog,” the chairman said.
Goldman acknowledged writing an e-mail message to the board on June 28, 2004, summarizing, among other things, what he knew of the phone call between Cuban and Faure earlier that day.
“As anticipated he initially ‘flew off the handle’ and said he would sell his shares (recognizing that he was not able to do so until we announced the equity),” he wrote of Cuban.
In his testimony, Goldman said, “I had not anticipated he would sell before release of the information.”
On cross-examination, the chairman said he never asked Faure to obtain a non-disclosure agreement from Cuban. He also testified Faure didn’t tell him Cuban had agreed to keep the June 28 conversation confidential.
The regulator also presented testimony from Arnold Owen, the Mamma.com investment banker who said in an SEC interview that Cuban called him and learned details of the private placement plan. Owen said he told Cuban news of the the PIPE would “hit the tape” the next day.
In his own testimony, Cuban said he told Owen he planned to sell his Mamma.com shares.
The case is Securities and Exchange Commission v. Cuban, 08-cv-02050, U.S. District Court, Northern District of Texas (Dallas).