Former Kings Owner Sentenced to Prison For Insider Trading

Former Los Angeles Kings owner Jeffrey P. Sudikoff was sentenced to a year in prison and fined $3 million Friday for illegal insider trading in connection with his now-defunct communications firm.

The 44-year-old businessman pleaded guilty earlier this year, settling federal charges surrounding his unloading of stock in the former IDB Communications Group of Culver City.

In exchange for his plea to two counts of insider trading and one count of failing to file a proper form with the Securities and Exchange Commission, prosecutors dropped charges of conspiracy, forgery and lying to auditors, investors and the SEC.

Los Angeles federal Judge Dean D. Pregerson ordered Sudikoff to surrender to the U.S. Bureau of Prisons by Jan. 28.

Sudikoff started IDB Communications in 1984 with a $15,000 bank loan that he used to acquire a satellite uplink station. The company grew into a major global satellite network, providing telephone, TV and radio transmission services to clients ranging from the White House to MTV. With 800 employees and annual revenues exceeding $300 million, IDB became a darling of Wall Street.

However, a federal grand jury indictment returned in 1997 accused Sudikoff and his business partner, Edward Cheramy, 56, of inflating IDB’s first-quarter 1994 profit to satisfy Wall Street’s projections. In one scheme, the pair allegedly fabricated a $5-million equipment lease to boost sales 60%.

Prosecutors said the company’s accounting firm, Deloitte & Touche, got wind of what was going on and on May 23, 1994, resigned in protest as IDB’s outside auditor, a fact that was not disclosed to the public until a week later.

During that time, Sudikoff sold $1.8 million worth of his own shares of IDB stock, according to U.S. Assistant Attys. Dorothy L. Shubin and Jon C. Cederberg. On the day IDB announced Deloitte & Touche’s resignation, IDB stock, which traded on Nasdaq, tumbled to $7 from $14 a share.

By using inside information for his personal benefit, the prosecution said, Sudikoff defrauded IDB shareholders and investors and abused his position of trust as the company’s chief executive.

Sudikoff also pleaded guilty to failing to tell the SEC about another $1.7 million worth of IDB stock that he secretly sold in March 1994. The shares were funneled through a brokerage account that a friend opened in the name of a Cayman Islands corporation.

In doing so, prosecutors said, Sudikoff was able to evade the scrutiny of stock market analysts who monitor insider sales.

Cheramy pleaded guilty earlier this year to one count of securities fraud and is to be sentenced Dec. 16. He faces up to 10 months in prison and a $250,000 fine.

Sudikoff on Friday also settled civil charges the SEC brought against him in connection with the same case. He will pay penalties of $200,000 and will be barred from serving as an officer or director of a publicly traded firm for 12 years.

IDB was bought in 1994 by another telecommunications company that is now MCI WorldCom. Sudikoff, along with a partner, bought the financially troubled Kings that year but sold out in 1995 as the hockey team slipped deeper into the red.