Monday, November 24, 2008

SEC Misconduct in Cuban Case?

The case gets curiouser and curiouser. First we have Mr. Cuban screaming from the rooftops about prosecutorial misconduct. Then we find out that the entire case revolves around one telephone conversation between Cuban and's CEO that occurred 4 years ago, that each side has a reason to misremember. Then we find out that a trial attorney in the SEC's Texas office has been sending unsolicited nasty emails to Mr. Cuban regarding Mr. Cuban's political views, and questioning his patriotism.

And along the way we have issues of whether Cuban had any duty not to trade (he didn't, and hence the phone call allegations), and whether the SEC can even approach its burden of proof.

But wait! There's more! Act now, and you can receive more allegations of SEC misconduct from Mr. Cuban's attorney.

Cuban’s lawyer Best told Corporate Crime Reporter that “there are other allegations of misconduct – by SEC enforcement staff other than Jeffrey Norris.”

“When we make public these allegations, I am sure their will be an Inspector General investigation,” Best said.

Does Best mean that he will be making allegations of misconduct against SEC enforcement staff in Washington?

“All in due time,” Best wrote back. “No more info for now.”

The article also puts forth the view that the SEC has taken a hit to its reputation from recent damning reports out of the SEC Inspector General’s office, as well as its failures during recent years, and contribution to the current financial crisis, including Senator McCain's threat to fire Chairman Cox. The SEC clearly screwed up in its oversight function in the subprime mess, and the presidential campaign highlighted the SEC's involvement. If there is misconduct in connection with any case, and in particular one as newsworthy (whatever that means these days) as the Cuban case, the SEC is in for a rocky time.

The SEC Trial Attorney's emails to Cuban are pretty bad, and the fact that he is sending them during work hours, from his SEC email account, makes the content of those emails worse. However, one view of those emails is that they are the product of an overly fanatic basketball fan who also happens to be a wingnut. He will be punished in some way, for using the email account for personal matters, and that will be the end of it.

But if there is true misconduct, misconduct that will bring in the US Inspector General, this is really going to be an interesting case.
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