I was asked to do a post by a good friend and founder of NPost, Nathan Kaiser.  So here is my response to Nathan’s post on Mark Cuban’s recent run-in with the SEC for his alleged violations of insider trading rules.  On his post, Nathan asked the question if Cuban’s acts of defending himself publicly from SEC allegations of insider trading on his blog is a bad idea.

There are lots of questions you could ask about the Mark Cuban situation. For me, I focused on two key questions: (1) Is it a bad idea for Cuban to use his blog to post comments and thoughts about SEC allegations being lobbied against him? and (2) When is it a bad idea for you to use your blog for publicity sake?

I’ll caveat this – Mark Cuban is good for the NBA from an entertainment perspective. Quick: Name another owner of an NBA franchise. If you are from Seattle, you may be able to name Clay Bennett who is the owner of the Oklahoma Thunder (who moved from Seattle). Otherwise, there just aren’t that many owners you would know by name. Cuban is not a “behind-the-scenes” type of owner. He goes to games, sits near the floor, and gets into the action. He blogs about his team (among other things) and has no problem voicing his displeasure about the refs and various league policies. So much so, in fact, that he’s been fined numerous times by the NBA. But Mark Cuban sees himself as an entertainer and he’s drawn attention (both positive and negative attention at times) to his NBA franchise. Which, some would argue, means using his publicity and fame has been helpful in increasing the intrinsic value of the NBA and of the Dallas Mavericks.

So, to my first question, is it now a bad idea for Cuban to use his blog to rebut claims made by the SEC for insider trading? Certainly not an easy one to answer, but let me try.

It is not out of the ordinary for individuals to make public statements about their innocence (recall the countless appearances by high-profile attorneys on the steps of the courthouse making public statements about how their clients have been wronged). On the blog “Cranky Greg”, the Fresno, California lawyer recounts the public claims of innocence made by the lawyers for Michael Vick and Roger Clemens. So be it on the steps of a courthouse or on your blog, it isn’t unheard of to publicly claim your innocence.

So if Cuban’s response isn’t uncommon, is it the right approach? That’s an opinion question and one that is hard to come to a clear answer on (Cranky Greg advised that Cuban keep quiet). To me, perhaps Cuban was forced to comment just because the allegations became news. If Mark Cuban hadn’t publicly commented, would the media still have run the story and still aired the allegations? You bet. So whether or not he had commented, this story was going to get out and, in Cuban’s mind, the public could have quickly thought that he was guilty without a response. Cuban’s response was to use his public medium (his blog) and profess his innocence. Cuban’s response was akin to standing on the courtroom steps and banging on the podium that “I will be cleared of these unfair allegations.” Could this rile up the SEC and encourage them to push harder on this? Sure. But should we be shocked that Cuban took this risk? I don’t think so.

Looking at Cuban’s history, it isn’t at all surprising that he would publicly state his innocence. Remember, this is the same guy that has been fined over $1M by the NBA for his actions. But have these fines dissuaded him from commenting on the refs? Not yet… So we really shouldn’t be all that surprised about his public comments. (In fact, on a November 30, 2008 blog posting, Cuban points out a recent report to Congress by the Office of Inspector General where the OIG uncovered a “retaliatory investigation” by the SEC. Read what you will into that blog posting, but Cuban isn’t going to let this situation go quietly and seems to be putting the SEC on notice that he’s watching how they respond to his public statements.) For most of us that aren’t in the public eye, perhaps “going quietly” along with the situation might be the right approach. But for the Martha Stewarts, the Michael Vicks, the Roger Clemens, and the Mark Cubans of the world, going quietly won’t work when the media only has one-side of the story. These allegations will make the news.  When it does, pundits on TV could turn the simple “No Comment” into a failure to rebut the allegations (or worse, basically an admission of guilt). Like Cuban or loathe him, he just might have felt that he didn’t have a choice but to respond in a public setting. So in this case, maybe he should have kept quiet, but given that he is a public persona and the fact he felt that making no statement was almost like admitting he was in the wrong, he might have had no choice.

To my second question, and perhaps the lesson to be learned for the rest of us: When might it be a bad idea to use your blog for publicity sake? Suffice it to say, most of us aren’t Mark Cuban. But, a blog posting can quickly get attention in the viral world we now live in. And a blog posting about insider trading, securities fraud, or other unfair business activities could draw unneeded attention.

So, remember that your blog (or the blog of any employee) could very well reflect on the brand of your business. If you plan to post a negative comment on a competitor, raise an issue with a public official, or rebut allegations of certain activities, be cautious of how this translates to your place of employment. And, the one thing that all of the public personas show us is that they each consulted a lawyer before they made their comments. Given all the evidence that could be used against you if you are subject to a claim by a court or an agency, say less where you can, but if you feel you must say more, check with your lawyer first. Even if you delete a blog posting, we all know that it may not ever leave the ether.

It will be interesting to see how this all plays out for Mark Cuban. It is a lesson for anyone that issues securities (even a very early-stage startup) or someone that invests in securities (even an angel investor): Be cautious with securities laws as they are complex and can lead to fines or jail time. When in doubt, ask for help. Maybe a simple call by Cuban to his lawyer would have helped keep all of these problems at bay.