UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16737 / September 28, 2000
Securities and Exchange Commission v. Timothy J. Sullivan, James G. Appleton, Lance P. Lins and James A. Budzinski, (U.S.D.C. E.D. Wis., Civil Action No. 00C1299, filed September 28, 2000).
The Securities and Exchange Commission announced that it filed a complaint in the United States District Court for the Eastern District of Wisconsin on September 28, 2000 against Timothy J. Sullivan ("Sullivan"), a resident of Hartland, Wisconsin, James G. Appleton ("Appleton"), a resident of Green Bay, Wisconsin, Lance P. Lins ("Lins"), a resident of Green Bay, Wisconsin, and James A. Budzinski, a resident of Muskego, Wisconsin. The complaint alleges that Sullivan, Appleton, Lins and Budzinski engaged in insider trading by purchasing and/or tipping others to purchase the stock of Sullivan Dental Products, Inc. ("Sullivan Dental"), while in possession of material, non-public information. The Commission is seeking a permanent injunction, disgorgement of their ill-gotten gains plus prejudgment interest and a civil penalty from each of the defendants.
In its complaint, the Commission alleges that during the last weekend in July 1997, Sullivan, the President, Chief Financial Officer and a director of Sullivan Dental, tipped Appleton, Lins and Budzinski about an impending merger between Sullivan Dental and Henry Schein, Inc. ("Henry Schein"). The Commission further alleges that during the following week, Appleton, Lins and Budzinski all purchased Sullivan Dental stock and in turn, tipped certain members of their families and friends, all of whom also purchased Sullivan Dental stock. The Commission alleges that a total of 16 different accounts related to Appleton, Lins and Budzinski purchased Sullivan Dental stock after Sullivan tipped them about the impending merger. Many of these accounts were opened for the purpose of purchasing Sullivan Dental stock by persons who had never purchased stock before, who had very little investment experience and/or who borrowed more than their annual income in order to make the purchase. On August 4, 1997, when Sullivan Dental and Henry Schein publicly announced that they had definitively agreed to a stock-for-stock merger, Sullivan Dental stock closed at $28.50 per share, an increase of $6.25 per share from the previous day's closing price. The Commission alleges that as a result of their insider trading in Sullivan Dental stock, Sullivan, Appleton, Lins and Budzinski and their tippees received approximately $175,602.63 in realized and unrealized profits.
The Commission alleges that Sullivan, Appleton, Lins and Budzinski violated Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder in connection with their insider trading in the stock of Sullivan Dental.