SEC Suit Alleges Insider Trading at Cisco

Federal regulators Thursday charged a former Cisco Systems Inc. employee and two of his brothers with trading on inside information about technology company mergers.

Anthony Sudol III, 44, formerly a high-level manager at Cisco, tipped off his younger brothers to mergers before they were announced, the Securities and Exchange Commission said in a lawsuit filed in federal court in San Francisco.

Authorities said the two younger brothers each made about $220,000 in profits on trades from 1999 to 2003.

The civil lawsuit charged Sudol, of Gilroy, Calif., and his brothers Michael, 42, a Motorola Inc. employee based in China, and Richard, 41, of Oceanside, Calif., a day trader on leave from Lucent Technologies Inc.

The SEC is seeking a court order that would bar the brothers from violating securities laws in the future and force them to return their allegedly ill-gotten trading gains and pay a fine.

Cisco terminated Sudol and cooperated with the investigation, according to the SEC. All three brothers are contesting the SEC’s charges.

At Cisco, Sudol worked on integrating new acquisitions, making him privy to information he was supposed to keep confidential, the SEC said.

Authorities said the two brothers traded in shares of Geotel Communications Corp., CAIS Internet Inc., Active Voice and Latitude Communications, and said one of them traded in a fifth stock, Arrowpoint Communications Inc.

Cisco acquired the companies in whole or in part, and the SEC said that in each case, the stock price of the acquisition target rose when the deals were announced.

Attorneys for Cisco and two of the brothers weren’t available to comment.

Richard Sudol’s attorney declined to comment, saying he had not yet seen the SEC’s complaint.

Cisco shares fell 14 cents to $17.89 on Nasdaq.