S.E.C. Again Takes On Mark Cuban in Insider Case

Mark Cuban has tussled with Bill O’Reilly, Donald Trump and an array of N.B.A. referees.

Next up? The federal government.

The Securities and Exchange Commission’s insider trading trial against Mr. Cuban opens in a federal courtroom in Dallas on Monday, the culmination of a five-year battle. Mr. Cuban, a 55-year-old reality TV regular best known for his courtside antics at games of the Dallas Mavericks, the basketball team he owns, is one of the few celebrities to land on the agency’s radar.

Mr. Cuban’s star power, coupled with the S.E.C.’s renewed ambition for taking cases to court, underpins the importance of this trial.

After enduring its share of losses at trial and a public lashing for missing signs of the financial crisis, the agency is fresh off its most significant courtroom victory in recent memory with a win over Fabrice Tourre, a former Goldman Sachs trader at the center of a toxic mortgage deal. A victory in Mr. Cuban’s case might further embolden the S.E.C. as it seeks to hold individuals accountable at trial, a policy championed by its new chairwoman, Mary Jo White.

For Mr. Cuban, who has a net worth pegged at $2.5 billion, the courtroom fight is not about the money. If found liable, he faces a fine of about $2 million. Having doled out about that much in fines to the National Basketball Association, Mr. Cuban is instead fighting to clear his name and dress down an agency that accused him of trading on confidential information when dumping his stake in an Internet company.

Over five years and in three different courthouses, Mr. Cuban’s case has had many twists and turns. A judge dismissed the lawsuit in 2009 and an appeals court reinstated it a year later. This year, Mr. Cuban sought to delay the trial to accommodate what the S.E.C. mocked as his “Hollywood production schedule” â€" a swipe at his commitment to film the latest season of the reality show “Shark Tank.”

Mr. Cuban has fired his own shots in the case, using his blog to criticize the agency for a “facts be damned” approach, suing it to uncover records about its investigation and even suggesting that the insider trading case stemmed from an S.E.C. employee who questioned Mr. Cuban’s involvement in a documentary film that smeared “the good name of a patriot like President Bush.”

While the employee was fired, an inquiry by the S.E.C.’s inspector general cleared the agency of any misconduct, concluding that the employee was not involved in the investigation of Mr. Cuban.

The contentious back story will not figure into the trial, but Mr. Cuban’s feistiness very likely will. And that personality, which will enter the spotlight when Mr. Cuban takes the witness stand as expected, might sway a jury of Dallas residents who have largely embraced Mr. Cuban.

“He does things I never thought he’d do,” said L.T. Johnson, a Dallas resident and Mavericks fan. “He should be up in a box like the other owners, but instead he’s on the floor, with the players and fans.”

Mr. Cuban made his fortune on the eve of the dot-com crash in 1999, selling his start-up, Broadcast.com, to Yahoo for nearly $6 billion. He bought the Mavericks months later, and now has co-ownership stakes in the movie chain Landmark Theaters, among other media companies.

The S.E.C.’s case traces to June 2004, when the Internet search engine company Mamma.com was planning a private offering of its stock. The company expected Mr. Cuban to balk at the deal, which was likely to hurt Mamma.com’s stock price and dilute the holdings of existing shareholders like Mr. Cuban.

Yet Mamma.com hoped to win over Mr. Cuban, who already owned 6.3 percent of the company’s shares. During an eight-minute phone call on June 28, 2004, Mamma.com’s chief executive, Guy Fauré, made his pitch for the private offering.

According to the S.E.C., Mr. Cuban agreed to keep the information confidential. And after becoming “very upset and angry” when learning about the private offering, the S.E.C. said, Mr. Cuban declared “I can’t sell” the existing shares because he had access to inside information.

Mr. Fauré urged Mr. Cuban to consult the investment bank arranging the private offering, Merriman Curhan Ford, now Merriman Capital, before deciding. When Mr. Cuban spoke to a Merriman employee, according to the S.E.C., he learned “additional confidential details” about the deal.

One minute after the call with Merriman ended, Mr. Cuban ordered his stockbroker to dump his entire stake in Mamma.com. By unloading the shares just hours before Mamma.com announced the offering, Mr. Cuban avoided about $750,000 in losses.

More than four years later, the S.E.C. charged Mr. Cuban with insider trading. Since then, the S.E.C. has argued that Mr. Cuban tried to “conceal his wrongful trading” and concocted “a cover story,” by sending an e-mail to his broker saying, “I want to make sure I was 100 pct kosher on that trade.”

Mr. Cuban’s lawyers dispute those accusations.

“Mr. Cuban’s e-mail to his broker, which asked that the investment bank’s compliance department be consulted, obviously sought more scrutiny of his entirely proper trading, not to cover it up,” the lawyers, Christopher J. Clark of Latham & Watkins, Stephen Best of Brown Rudnick and Thomas M. Melsheimer of Fish & Richardson, said in a statement. They added that “far from concealing his trading, Mr. Cuban voluntarily spoke to the S.E.C. without an attorney when they called him about an unrelated” investigation into Mamma.com.

“We expect that when the facts come out,” the statement said, “Mark will be vindicated.”

The defense has several factors working in its favor. For one, the judge assigned to the case, Sidney A. Fitzwater, has been skeptical of the S.E.C. from the start.

Judge Fitzwater dismissed the case in 2009, ruling that the S.E.C. had to show two things: that Mr. Cuban agreed to keep the information confidential and that he agreed not to trade on it. The S.E.C.’s complaint was “deficient” in proving the second, Judge Fitzwater ruled, noting that Mr. Fauré never asked Mr. Cuban not to trade.

The United States Court of Appeals for the Fifth Circuit reversed the judge’s dismissal a year later. This March, Judge Fitzwater allowed the case to proceed to trial, calling his decision “in some respects a close one.”

The S.E.C. could face additional problems at trial as its case hinges on the testimony, and memory, of Mr. Fauré. There is no recording of Mr. Fauré’s call with Mr. Cuban. And Mr. Cuban does not recall the nine-year-old conversation.

To further bolster the defense, Mr. Cuban’s lawyers are likely to portray Mr. Fauré as unreliable.

During his initial interview with the S.E.C., Mr. Fauré did not mention that Mr. Cuban immediately agreed to keep the information confidential. It was not until his second interview with the S.E.C. that Mr. Fauré recounted how Mr. Cuban said “something to the effect” of “um hum, go ahead” in response to hearing that Mamma had “confidential information” to share.

Mr. Cuban’s lawyers will most likely highlight the curious timing of Mr. Fauré’s additional testimony. Mr. Fauré, according to court records, changed his story about two weeks after learning that the S.E.C. dropped an unrelated investigation into Mamma.com.

The lawyers will also stress that Mr. Fauré’s e-mails to Mr. Cuban did not mention a confidentiality agreement. Mr. Fauré chose not to pursue such an agreement, court records say, even though one of Mamma.com’s outside lawyers advised the company to obtain a signed contract from Mr. Cuban.

If Mr. Cuban escapes unscathed in the courtroom, his problems will very likely shift to the basketball court, where the season is poised to start. The Mavericks, champions in 2011, are coming off a disappointing season in which they missed the playoffs.

British Game Maker Behind Candy Crush Seeking I.P.O. in U.S.

The game maker King has conquered the mobile gaming world from its home base in London. Now, King, the company that created Candy Crush Saga, has its eye set on becoming a top technology initial public offering â€" across the Atlantic Ocean.

The company has filed for a public offering in the United States, according to people briefed on the matter, in what promises to be one of the biggest debuts by a gaming company in over a year. It has also retained Bank of America Merrill Lynch, Credit Suisse and JPMorgan Chase to lead the offering, according to the people, who spoke on the condition of anonymity because the listing process is being done in secret.

A spokeswoman for King declined to comment.

King joins the growing list of technology companies seeking to go public, in what investors and deal makers hope will signal a revival amid a slump in the sector. That potential wave is being led by Twitter, whose impending stock sale is one of the most highly anticipated since that of Facebook last year.

An offering by King, at what some analysts estimate will be a multibillion-dollar valuation, would be the latest triumph for the company. Candy Crush Saga, its signature app, has become one of the most popular apps on Apple’s iOS and Google’s Android operating systems. It is also the highest-grossing game on both operating systems, according to data firms like App Annie.

King may still have to overcome skepticism about the last gaming company to make a highly public offering, Zynga. After its much-ballyhooed market debut in December 2011, Zynga has struggled amid declining popularity, employee layoffs and costly missteps like the nearly $200 million purchase of OMGPOP, a game maker that the company has since shut down.

Zynga shares closed on Friday at $3.78 each, down 62 percent from their initial offering price.

King is hoping to avoid that fate, with an expected emphasis on its strength in mobile devices. Founded by a group of entrepreneurs in 2003, the company had grown largely through games that ran on its Web site. It now offers 150 games in 14 languages on its site, Facebook and mobile devices. It maintains offices in five cities aside from London, including San Francisco and Barcelona.

The company says that it has been profitable since 2005, and claims more than 225 million monthly active users.

But it was the introduction last year of Candy Crush Saga, a puzzle game in which users try to clear vibrantly hued candy shapes, that helped the company reach new heights of prominence and profitability.

The game itself is free to download, and many users will pay nothing. But the company dangles the prospect of extra lives or bonuses to help clear levels through in-game purchases that start at about 99 cents. Users can also take to Facebook to ask for help from their friends.

The company’s next big hit appears to be Pet Rescue Saga, which currently ranks eighth among Apple’s top-grossing apps. Candy Crush Saga is ranked first.

Little information is publicly available about King, which is privately held. Like Twitter, the company has filed its public offering materials confidentially, taking advantage of the Jumpstart Our Business Start-Ups Act, the people briefed on the filing said. Passed last year, the law, known as the JOBS Act, allows companies with less than $1 billion in revenue to begin the listing process in secret. News of King’s filing was first reported by The Daily Telegraph of London.

The confidential filing will shield King from scrutiny by public investors and the news media for several months, as the Securities and Exchange Commission reviews its offering documents. Should the company choose to move forward, its first public prospectus would be published three weeks before a roadshow for investors begins.

But analysts estimate that King’s business model has worked extremely well so far. The consulting firm Think Gaming estimates that Candy Crush Saga alone brings in $850,016 in daily revenue for King â€" or about $310 million a year.

Those who could profit from a successful offering are King’s six founders, led by the chief executive Riccardo Zacconi, and Apax Partners and Index Ventures, who together invested 34 million euros, or $46 million, in the company.

King appears to be making other moves to prepare for an eventual offering. Last week, it announced that it had hired Hope Kaplan, who was most recently chief financial officer of the cellphone network operator Clearwire, to serve in that role at the company.

Wall Street Uneasy in Face of Government Shutdown

Wall Street has wearily grown accustomed in recent years to periodic market flare-ups caused by fiscal fights in Washington.

But the current battle â€" and the looming threat of a government shutdown on Tuesday â€" is beginning to cause greater unease than past political disputes and may rattle markets when they reopen on Monday. .

For investors, the chief fear is that a government shutdown would set the stage for a more momentous battle over the so-called debt ceiling. If there is no agreement to raise the borrowing limit by mid-October, the government will not be able to issue more bonds and could default on its outstanding borrowing.

While Congress in the past has waited until the last minute to raise the debt ceiling, a growing number of analysts say that the political disagreements appear to be more intractable this time around.

“The threat of a default, however remote, seems to be on the table now,” said Gregory R. Valliere, the chief political strategist at Potomac Research Group.

Still, there have been government shutdowns in the past and the markets have quickly recovered. At the end of last year, Congress approved legislation that averted a series of tax increases and budget cuts known as the fiscal cliff. Stocks fell sharply in the days leading up to that agreement, but they rebounded quickly.

And in past debates over budget issues, investors were faced with other big crises that heightened the sense of risk, including the European debt crisis and a potential double-dip recession in the United States.

Since the beginning of this year, most other serious threats to the global economy have faded and Wall Street has habituated to relatively smooth sailing. The benchmark Standard & Poor’s 500-stock index is up over 18 percent this year.

In recent weeks, the primary concern among market participants has been the Federal Reserve and its decision about whether to slow down, or taper, the bond-buying programs that have been used to stimulate the economy.

The Fed’s decision to hold off on tapering was still the main topic of conversation on trading desks at the beginning of last week. But as the week went on, more and more investors began to tune in to the standoff between House Republicans and Senate Democrats. Stocks fell on Friday to close out the first down week in a month.

The main focus on Wall Street is the possibility that the government will stop making payment on its outstanding bonds when the current borrowing limit is reached, which is expected to happen on Oct. 17.

Treasury bonds are viewed as the bedrock of financial markets, thanks largely to the assumption that the United States will always pay its debts. Most analysts say that if that were thrown into question, the consequences would be catastrophic, and largely unpredictable.

“Even if it’s a brief failure, it would forever be a signal to the market that you can’t trust the United States government to make its payment when it’s due,” said Millan Mulraine, the director of United States research and strategy at TD Securities. “That would shake the foundations of the global financial system.”

Before Congress can turn its full attention to the debt ceiling, it will first have to deal with a resolution to keep the government open when the new fiscal year begins on Tuesday.

House Republicans passed legislation over the weekend that would keep the government operating only if funding for President Obama’s health care bill is delayed for a year and a tax on medical devices is permanently repealed. The Democrats who control the Senate have said they will not agree to those conditions.

Most Wall Street economists have said that the consequences of a temporary government shutdown would be relatively insignificant, particularly because spending on essential services â€" a large portion of the budget â€" would continue. Citigroup economists estimated on Friday that a one-week shutdown would probably cause a 0.1 percent hit to the national economy.

But many strategists say that the outcome of the debate over the shutdown is important because it will set the backdrop for the battle over the debt ceiling. Mr. Mulraine said that a disagreement this week would most likely mean that “both sides are so entrenched that making progress on the debt ceiling would be much harder.”

In contrast, Alec Phillips, a Goldman Sachs economist, said Friday that a shutdown could “ease passage of a debt-limit increase” because House Republicans could lose their bargaining leverage.

Led by Speaker John A. Boehner, House Republicans have already said that they would demand even more concessions in order to agree to a lifting of the debt ceiling, including changes to environmental and financial regulations.

Economists at Bank of America and Capital Economics wrote on Friday that the focus on President Obama’s health care legislation makes the positions of both sides more intractable now than they have been during other budget fights.

“We have no idea exactly how this standoff will be resolved, and even less of an idea exactly when any agreement might be reached,” the Capital Economics team said in a note to clients on Friday. “At this stage, we would be lying if we said we were confident of a positive outcome.”

If the disagreements persist, the reaction in the markets is likely to become much more pronounced as Oct. 17 draws closer. Mr. Valliere said that in the past, sharp swings in the markets helped to eventually push politicians toward a compromise.

“You have to worry that the one thing that could motivate Congress to step away from the precipice would be an angry reaction from the stock market,” he said.