Mark Cuban created Web site in 2006 to expose securities fraud
dallasnews.com | 11/18/08 | suspect: Mark Cuban | victim: Mamma.com
Long before the U.S. Securities and Exchange Commission accused Mark Cuban of insider trading in shares of a company called Mamma.com, the outspoken Dallas billionaire showed a keen interest of his own in uncovering securities fraud.
He also tried to profit by exposing it.
In 2006, Mr. Cuban founded Sharesleuth.com, a Web site that says its reporting is "aimed at exposing securities fraud and corporate chicanery." He hired a veteran business journalist to run it.
But protecting innocent shareholders isn't Share sleuth's only goal. It says on its Web site that Mr. Cuban "is going to make personal investments based on information we uncover."
In its first investigation into the alleged shortcomings of an Atlanta-based ethanol company, the Web site disclosed that Mr. Cuban had sold short 10,000 shares of the company's stock - meaning he would profit if the stock price fell.
Not all of Sharesleuth's stories have doubled as trading opportunities. A recent piece about a Dallas-based oil and gas promoter said neither Mr. Cuban nor anyone else at Share sleuth had any financial interest in the company.
Mr. Cuban said Monday that his experience with Mamma.com inspired him to launch the investigative Web site. "Sharesleuth was founded with the idea that there were other crooked companies out there like Mamma," he said in an e-mail.
"I thought that like any other investor, I would trade on the public information we uncovered," he said. "By also sharing it, future investors could avoid the companies we covered."
The chief executive Copernic Inc., the company that owns Mamma.com, didn't answer a voicemail message. The company's former CEO (in 2004, when Mr. Cuban owned his stake) declined to comment. The former CEO's lawyer also declined to comment.
The SEC investigated Mamma.com in 2004 after a sudden rise in trading activity in the company's stock. As part of the probe, the SEC tried to determine whether a convicted stock promoter, Irving Kott, exercised undisclosed influence over the company.
In 2007, Mamma.com settled a shareholder lawsuit that alleged Mr. Kott and his associates engaged in a "pump and dump" scheme to manipulate the stock's price. The lawsuit alleged that Mr. Kott was referred to as the company's "godfather."
Mr. Kott could not be reached for comment.
As for Mr. Cuban, he's expanding his foray into investigative journalism.
Last month, he launched a Web site called BailoutSleuth to track how taxpayer money is being used in the U.S. government's $700 billion rescue package for the financial system, as well as the Federal Reserve's efforts to backstop key financial institutions.