Gilroy
– Former City Councilman Anthony Sudol III has been sued by the
U.S. Securities Exchange Commission for allegedly passing insider
information on corporate acquisitions to his brothers, Michael and
Richard Sudol.
Gilroy – Former City Councilman Anthony Sudol III has been sued by the U.S. Securities Exchange Commission for allegedly passing insider information on corporate acquisitions to his brothers, Michael and Richard Sudol. The civil suit alleges that Sudol, who worked at Cisco Systems in a division responsible for acquiring and integrating new businesses, passed “non-public” information to his brothers about impending takeovers on five separate occasions.
Sudol, who officials said brought a private-sector mentality to city council during his sole term from 1997 to 2001, allegedly helped his brothers earn more than $400,000 in profits based on confidential information. Both brothers are named as defendants in the SEC complaint.
It states, for instance, that in October 2000, Sudol worked with the Cisco group that negotiated the purchase of Active Voice Corporation, a provider of Internet-based e-mail, voice mail and fax services.
Shortly after the negotiations commenced, Sudol’s brothers began purchasing shares of stock in Active Voice. Between Oct. 5 and Nov. 2, 2000, Michael Sudol accumulated 10,000 shares; between Oct. 6 and Nov. 9, Richard Sudol purchased 20,000 shares, according to the complaint.
Cisco publicly announced its acquisition of Active Voice prior to the market opening on Nov. 10. That day, the stock price increased 28 percent, or $4.19 per share.
Michael Sudol sold his shares that day and the next for a profit of $72,905; Richard Sudol sold his shares “shortly after the acquisition announcement” for a profit of $137,163, according to the complaint.
The four remaining cases involve similar circumstances in which the brothers profited by purchasing stocks just prior to acquisition announcements. The SEC has sued to recover the $400,000 gained from the five cases.
Debra Patalkis, lead attorney for the SEC, declined to comment on the scope of the investigation or what triggered it.
Insider trading cases generally rely on trading records, phone calls, e-mails and other records of electronic communication, as well as witness testimony.
It remains unclear if the SEC will also file criminal charges.
Sudol, who began working for Cisco in November 1996, just one year before he became a councilman, declined to comment.
City officials said a number of programs Sudol backed during his term are now taking form.
“He was big into youth programs,” said City Councilman Craig Gartman, who served as treasurer during Sudol’s successful bid for City Council. “One of the things that Tony wanted to get started was a bike park, which is now beginning to happen. That is being worked on by (the Parks and Recreation Commission) as we speak.”
Sidewalks and economic development were also big campaign issues, Gartman said, adding that Sudol was very involved with starting up the Gilroy Economic Development Corporation.
City Administrator Jay Baksa said, “(Sudol) tried to bring a private-sector approach to local government. He was trying to make us more efficient … trying to show us that time is money.”
But Sudol ultimately chose a different mantra in his personal life, according to Gartman, who said the former councilman passed on a second term in order to spend more time with his wife and son.
“His job during his first term changed dramatically,” Gartman said. “He was doing a lot of traveling. It was taking a lot of family time away.”
He ultimately retired from Cisco Systems in January 2004, but it remains unclear why or under what circumstances.
Cisco representatives could not be reached for comment.
Sudol has not dropped out of public life entirely since leaving City Council. City Planning Manager Bill Faus said he has had several discussions with the former councilman “concerning a number of development ideas he’s had.”
Faus declined to elaborate since Sudol has not submitted any formal proposals.
Sudol and his brothers have the option to settle out of court, according to an order filed with the U.S. District Court, San Francisco. A pre-trial conference is scheduled for July 12.
