This document
is
subject to the provisions
of
the Privacy Act
of
1974,
and
may
require redaction before disclosure to
third
parties.
No
redaction has been performed
by
the Office
of
Inspector General. Recipients
of
this report should
not
disseminate
or
copy it without the Inspector General s approval.
REPORT
O
INVESTIGATION
UNITED STATES SECURITIES
AND
EXCHANGE COMMISSION OFFICE
O
INSPECTOR GENERAL Case
No
OIG-511 Allegations
of
Enforcement Staff Misconduct
in
Insider Trading Investigation
August 22, 2011
REDACTION KEY
LE
= Law Enforcement/ Interference with Enforcement Proceedings Protected by FOIA Exemption (b)(7)(A)
DP
= Deliberative Process Privilege Protected by FOIA Exemption (b)(5)
AC
= Attorney-Client Privilege Protected by FOIA Exemption (b)(5)
WP
= Attorney Work-Product Privilege Protected by FOIA Exemption (b)(5)
PII
= Personal Identifying Information Protected by FOIA Exemptions (b)(6) & (b)(7)(C) Redactions that appear with pseudonyms (e.g., Attorney 1 and Witness 1) are protected by FOIA Exemptions (b)(6) & (b)(7)(C).
This document is subject to the provisions
of
the Privacy Act
of
1974,
and
may require redaction before disclosure to third parties.
No
redaction has been performed by the Office
of
Inspector General. Recipients
of
this
report
should not disseminate
or
copy
it
without the Inspector General s approval.
REPORT
OF
INVESTIGATION Case No. OIG-511 Allegations
of
Enforcement Staff Misconduct
in
Insider
Trading
Investigation Table
of
Contents
Introduction Summary
of
Allegations ............................................................................. 1 The Civil Litigation .................................................................... ...................................... 3 Executive Summary
of
Investigative Findings ................................................................... 5 Scope
offue
OIG s
Investigation ....................................................................................... 9 Applicable Policy and Regulations .......................................................................•........... 10 Results
of
the Investigation ..............................................................................................
15 I
BACKGROUND FINDINGS
..................•....•.........•.........................................•....•..•....
15 A
Initiation
offue
Investigation Into
Mr
Cuban s Sale
of
his Mamma.com Stock Shares ....................................................................................................
15
B
The HO-09900 Investigation into Mamma.com .............................................
16
C
Early Investigative Work into Mr. Cuban s Sale
of
Mamma. com Stock .......
19
D. A Fort Worth Regional Office Trial Attorney Began an Inappropriate E-Mail Exchange wifu Mr. Cuban from his SEC Computer in March 2007
23
1
The March 2007 E-Mails ..........................................................................
23 2
The FWRO Attorney Sent More E-Mails to Mr. Cuban
in
May
2007, Copied to Former Chairman Cox, and fuen Forwarded Them to Associate Director Friestad ....................................................................... 24
3
Actions Taken After fue Chairman was Copied on, and Associate Director Friestad was Forwarded, fue May 2007 E-Mails ....................... 26
4
Former Chairman Cox Recused Himself from fue Commission Meeting to Decide Whether to Authorize Suit Against Mr. Cuban ........................ 30
5
The FWRO Trial Attorney Was Disciplined for Sending Inappropriate E-Mails to Mr. Cuban from his SEC Computer .......................................
31
E. The Wells Call and Process ............................................................................ 32
1
The Wells Notice to Mr. Cuban s Counsel ...............................................
33 2
Mr. Cuban s Counsel s Request for Evidence .......................................... 34
3
The First Wells Submission ...................................................................... 37
F
Trial
ouns~l
Gets Appointed to Case ........................................................... 38
G
The Pre-Wells Meeting ................................................................................... 39
1