A Bad Year for Mavericks:

2008 will surely go down in history as a terrible year for mavericks. First, the Jason Kidd trade failed to give the Dallas Mavericks the boost they needed to advance deeper into the playoffs. Then, superstar Dirk Nowitzki had another mediocre postseason. On the political front, "maverick" John McCain was soundly beaten in the presidential election, and fellow self-proclaimed maverick Sarah Palin wasn't able to help the Republican ticket anywhere near as much as McCain must have hoped.

And now, Mavericks owner Mark Cuban has been charged with insider trading. And corporate law maven Steve Bainbridge believes that the SEC has a "pretty good case" against him. At this point, the mavericks of the world can't wait for 2009.

UPDATE: Mavericks also can't be happy that their longtime rival, the Iceman, is likely to run for governor of New Mexico. It doesn't look like there will be any strong maverick candidate to put up against him.

Plus, Iceman got elected president…
11.18.2008 2:21am
mls (www):
Plus James Garner had a (fortunately minor) stroke.
11.18.2008 6:07am
Chris 24601 (mail) (www):
Plus that Valkyrie movie is set to be a bomb. Don't know about Mel Gibson.
11.18.2008 7:53am
Glenn W. Bowen (mail):

"It's been my home 25 years. I really love my state. Poor, hardworking, decent people. Native Americans, carpenters, artists, expats mixed in with hundreds of the world's smartest physicists at Los Alamos. I've always thought of myself as functioning as a candidate for them … I would be very comfortable in my position as a representative for the people."

This guy is probably the epitome of a Hollywood Dolt.

...but ya know, it's really nice of those smart guys to hang with the Indians.
11.18.2008 8:32am
DiverDan (mail):

And corporate law maven Steve Bainbridge believes that the SEC has a "pretty good case" against him.

That is, it's a "pretty good case" if they can find a Court that's willing to ignore the requirement of a fiduciary relationship established by the Supreme Court in Chiarella, and reaffirmed in Dirks, or allow the SEC to pursue its "misappropriation" theory (based on the SEC's Rule 10b5-2) in a case where, according to the Complaint, Cuban was NOT an insider, Cuban did NOT solicit or request the information, and there was NO explicit promise by Cuban not to ACT on the information.

Frankly, if the SEC wants to stop this particular brand of insider trading, all they need to do is go after's CEO, who had no legitimate reason for sharing the inside information, other than to try to hamstring Cuban. I've lost none of my respect for Cuban after reading the Complaint, assuming everything in it is factually accurate. I will NOT however, ever invest in a company in which Guy Faure ('s CEO) is an officer or has any position of responsibility -- that guy is a dishonest weasel with no regard for the rights or interests of shareholders.
11.18.2008 8:44am
Since you're on a Top Gun theme - let's just all stipulate that "Maverick" Tom Cruise might be one of the very few people who would be even worse in that (or any other) elected office than "Iceman" Kilmer. Can we pass that resolution by unanimous consent?

What's with these Hollywood types? Next thing you know some actor will come up with the silly idea he's qualified to be governor of California, or something...
11.18.2008 8:48am
Lighten up Kansas:
Great true story about my buddy. We were in Boston, walking along Newbury St. on a fall Sunday evening to hit the bars. We see Val walking past us with a lady friend. My friend smiles at him and says "Hey Val, what's up man?" in a friendly tone. Dic Holiday ignores him.

My buddy then says it again in a louder voice, as maybe Kilmer didn't hear him the first (which was possible). Kilmer stops, turns around, and yells at the top of his lungs "Get a F***ing life kid!" with a snarl on his face, then stalks away. I froze there, astounded, while my buddy doesn't miss a beat and yells right back "well, you sucked as Batman anyways!"
11.18.2008 10:26am
Justin Chen (mail):
So Steve Bainbridge concludes his analysis with
"My review of the complaint suggests that the SEC has a pretty good case, assuming they can prove out the facts alleged, and they get a court willing to give the rules a liberal construction on one key point."

What sort of BS analysis is this? Seriously, if I prove the facts alleged in every complaint I file and get a liberal construction on the law I'm pretty sure I'd be batting 1000.
11.18.2008 11:13am
frankcross (mail):
If you are commenting on Bainbridge's analysis, you should read it first. Bainbridge explains the theory by which Cuban could be considered an insider, citing precedents, and he's not talking about some across the board liberal interpretation. He just notes uncertainty about one issue, on which the court might easily go either way. If it takes a more liberal approach, he says Cuban uses.
11.18.2008 11:34am
Dave Ruddell (mail):
KITT for govenor!
11.18.2008 12:04pm
Brett Gardner (mail):
Normally I would respond to this on a sports blog, but as a Mavs fan, I cannot let this go unsaid.

Another mediocre postseason by Dirk?

Dirk's last 3 postseasons:

2005 (the Finals year): 27 ppg, 11.7 rbpg.
2006: 19.7 ppg, 11.3 rbpg.
2007 (The supposedly bad year): 26.8 ppg, 12 rbpg.

The Mavs have choked, but you can't blame Dirk. I expect a full retraction.
11.18.2008 12:13pm
Crust (mail):
But perhaps the citizens of Maverick County, Texas had a good year. Their candidate (they voted 78-21 for Obama) won the election. I think I read somewhere that Maverick County was Obama's best county outside of Hawaii by some measure (I think swing in margin from the previous election), but I can't find the link.
11.18.2008 12:17pm
DiverDan (mail):

Bainbridge explains the theory by which Cuban could be considered an insider, citing precedents, and he's not talking about some across the board liberal interpretation. He just notes uncertainty about one issue, on which the court might easily go either way.

What you are talking about is the "constructive insider" theory, which is quite readily applied to accountants, lawyers, investment bankers, underwriters, and other consultants who are retained by the share issuer to assist in a given transaction. Courts have used the "constructive insider" label to create the fiduciary relationship status required under the Supreme Court's holdings in Chiarella and Dirks as a prerequisite to insider trading liability. The problem here is that Cuban does not fit into ANY of those categories; he was certainly not retained by to assist in the PIPE transaction. His position as a 6.2% shareholder is not enough to create an insider status, he was not an officer or director, and he did not solicit the information from the CEO.

Yes, a Court might go against Cuban on this issue, based solely on his verbal agreement to keep the info confidential (a promise which he apparently kept, by the way; he never made a promise not to ACT on the information, only that he wouldn't reveal it to others), but if so, he has a better than decent case on appeal that the legal ruling that created the "fiduciary relationship" that made him an "insider" was contrary to controlling Supreme Court precedent.
11.18.2008 1:36pm
Dave N (mail):
Mavericks also can't be happy that their longtime rival, the Iceman, is likely to run for governor of New Mexico. It doesn't look like there will be any strong maverick candidate to put up against him.
Yes, because the last two celebrity/actor governors, Jesse Ventura and Arnold Schwarzenegger, did such great jobs.

As for a maverick rival for "Iceman," former Republican Governor Gary Johnson would certainly qualify if he ran (though he appears more interested in running for President in 2012).
11.18.2008 1:53pm
John M. Perkins (mail):
As a Spurs fan I was unhappy that the Mavericks won on election night.

And as a Spurs fan, I hit the Val Kilmer link wondering why I hadn't heard of George Gervin's political ambitions.
11.18.2008 2:26pm
John Perkins beat me to the punch. I was hoping for a George Gervin story as well. I have not seen much about him lately and he was always a favorite.
11.18.2008 3:59pm
Xanthippas (mail) (www): this the first time the Dallas Mavs have gotten any virtual ink at Volokh? (I'd do a search but I'm far too lazy for that.) As a Mavs and Dirk fan I'm with Brett above; the idea that Nowitzki had a bad post-season is widely accepted among the masses, but it just ain't true. This seasons is, thus far, an unfortunately different story.

And how did Ilya miss this story, about a somewhat hostile e-mail exchange between Cuban and an SEC attorney in the Ft. Worth office about Cuban's participation in the documentary "Loose Change"?
11.18.2008 5:20pm
SFBurke (mail):
DiverDan: your analysis might be more compelling if you didn't obviously bear such animus to the CEO. Your assertion that the CEO had no "legitimate" reason to share the information with Cuban is bizarre. Why wouldn't a CEO let a deep-pocketed current investor know about a PIPEs offering and possibly induce him to invest? Sure the investor may decline, but letting him know would generally be considered good investor relations. The idea that this was some plot to hamstrung Cuban makes no sense. The deal was going to be announced in a day or so, and there was no evidence that Cuban was planning on selling. So if the CEO was seeking to stick Cuban with a stock loss, he could have just left Cuban in the dark and gone ahead with the public announcement.
11.18.2008 9:47pm
DiverDan (mail):
Yes, SFBurke, I do have a personal animus against the CEO - I think that whatever way you look at it he breached his fiduciary duty to the stockholders he was supposed to serve. If the company needed new capital, he had an affirmative duty to seek ways to raise the capital in a way that wouldn't damage the existing shareholders; the PIPE he arranged certainly wasn't it; the Company could have issued warrants to the existing shareholders which would have given them the right to protect their existing investment, instead of arranging a private infusion of capital at a price below the market price for the stock, a transaction which was guaranteed to both reduce the share price and dilute existing shareholders. Assuming, just for the sake of argument, that the Company was desparate for new capital, and the PIPE was the ONLY way to go, why did the CEO contact Cuban, to the exclusion of the other shareholders he was supposed to serve? Is there some arcane rule of corporate governance that I'm unaware of that says the fiduciary duty of officers and directors runs only to the largest shareholders?

All that having been said, just why does my judgment about the CEO of weaken my argument? The only issue in the case (assuming all of the facts of the complaint to be true) is whether or not Cuban owed a fiduciary duty to the Company. Does my thinking that Guy Faure is a weasel somehow create that duty? Cuban is not a traditional insider - he's not a director, officer, or even a controlling shareholder. Even if Guy Faure was the most honest, upright guy in the world, his conversation with Cuban would not create, out of thin air, a fiduciary relationship between Cuban and, and without such a relationship, there cannot be any "insider trading", for the simple reason that Cuban is not an insider. Please explain why you are less convinced of my argument just because you disagree with my judgment regarding Faure, a matter which is completely irrelevant to my conclusion.
11.19.2008 12:41pm
Dead Seriously (mail):
Will Iceman get Slider to make that ridiculous flex-grunt move he pulled during the volleyball match during the campaign?
11.19.2008 6:47pm
Ted Frank (www):
11.20.2008 10:10am