Federal Criminal Defense Blog : Georgia Federal Criminal Defense Lawyer & Attorney : Gillen Withers & Lake Law Firm : White Collar Crime, RICO, Trial : Atlanta, Savannah, GA

Today's Wall Street Journal Law Blog reveals that Dallas Mavericks owner, Landmark Theaters owner and Chairman of HDNet Mark Cuban has gone on the offensive against the Securities and Exchange Commission. The SEC made widely publicized charges against Mr. Cuban for insider trading in selling shares of Mamma.com, an internet search technology company now known as Copernic, in 2008. Mr. Cuban disputed the charges, and a federal court dismissed the charges last year.

Not satisfied, Mr. Cuban demanded evidence regarding whether the SEC had acted in in bad faith in bringing the charges, and the SEC provided documents to his counsel. Now Mr. Cuban is attempting to force the SEC to turn over still more documents. If the court holds that the SEC acted in bad faith, it could impose sanctions and force the Commission to pay Mr. Cuban's legal fees.

Christopher Aguilar, former general counsel for a broker-dealer who did work for Mamma.com, has submitted an affidavit stating that Julie Riewe, an SEC attorney, informed him in August 2007 that she would prefer if employees of the broker-dealer did not speak to Mr. Cuban's attorneys, although Mr. Aguilar "could do what he wanted." Mr. Aguilar stated that he believed that the statement was an attempt to not make a witness available to the subject or target of an SEC investigation. Mr. Aguilar eventually allowed Mr. Cuban's counsel to speak with the employee.

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As reported by Law.com, Bruce Karatz, Chief Executive Officers of KB Home, a home construction corporation based in Los Angeles, California, was indicted in the action of U.S. v. Nicholas, 2:09-cr-00203-ODW (C.D.Ca. 2009), on 20 counts of fraud for defrauding the company and its shareholders of millions of dollars in undisclosed backdated stock option over a period of seven years, and concealing the fraud from KB Home's  directors, compensation committee and shareholders. Karatz's trial in the U.S. District Court for the Central District of California is scheduled to begin on February 23.

Karatz's attorneys have requested a hearing regarding whether prosecutorial misconduct has tainted the government's case against Karatz. Karatz contends that two witnesses for the government--James Johnson, former Chairman of the Board of Directors' Compensation Committee for KB Home, and Gary Ray, former Vice President of Human Resources--initially believed that the stock options grant practice was lawful, but changed their position following contacts with the prosecution. Karatz's lawyers want to examine Johnson regarding why he denied allegedly defending KB Home's option granting process during an internal investigation by the company's outside counsel in his statements to prosecutors. 

The defense also wants to question Ray, who has pled guilty to obstruction of justice and is cooperating with the government, regarding why he had allegedly previously maintained that the process was "lawful and proper." Following is a link to

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Karatz's motion is based on an order in December by U.S. District Judge Cormac Carney in the action of U.S. v. Nicholas, SACR 08-00139 CJC (C.D.Ca. 2008), another backdating case, in which the Court dismissed the government's indictment against co-founder of Broadcom Corp., Henry Nicholas, and former Broadcom Chief Financial Officer William Ruehle, blasting the prosecution for "distorting the truth-finding process" by intimidating and improperly influencing key witnesses. Karatz also relies on the Ninth Circuit Court of Appeals' overturning last August of the conviction of former Chief Executive Officer for Brocade Communication Systems, Inc., Gregory Reyes, for backdating based on false statements by the prosecution in closing arguments that Brocade's finance department didn't know about backdating. A hearing on Karatz's motion has been scheduled for February 8.

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