SANTA ANA, Calif. (CN) — Former baseball star Doug DeCinces admitted to a federal jury Wednesday that he bought thousands of shares of a medical device company based on confidential information from its CEO that the company was about to be acquired for more than twice the price its shares were bringing.
Yet after the acquisition was announced — and his stockbroker insisted he take the $1.1 million profit he’d made — DeCinces said he grew very worried.
“I was worried because I had made a very huge mistake,” DeCinces said, by investing heavily in Advanced Medical Optics in part because of tips from his close friend, company CEO James V. Mazzo. “At that time, I couldn’t do anything to take it back.”
DeCinces, 67, once a power-hitting third baseman with the Baltimore Orioles and California Angels, was convicted in May last year of 14 counts of insider trading and faces up to 5 years in federal prison.
But that jury deadlocked on all charges against Mazzo. He is on trial again on some of the same charges, plus an additional four counts of perjury, before U.S. District Judge Andrew J. Guilford in the Central District of California, Santa Ana division.
DeCinces began testifying against his old friend Tuesday under a cooperation agreement that could spare him prison time if he provides “substantial assistance” in Mazzo’s retrial.
Assistant U.S. Attorney Jennifer L. Waier on Wednesday asked DeCinces why he agreed to testify in this case.
“First and foremost, I had been living with this for eight-plus years, and I felt like it was time to come out and get this off my shoulders,” he said.
Adding that he’d had “several medical issues” since his conviction, he said he and his family were concerned that “it was costing me my life holding it all in” and that it was “time to tell my story.”
On cross-examination, Mazzo’s lead attorney Richard Marmaro, with Skadden, Arps, Slate, Meagher & Flom, repeatedly asked DeCinces why it had taken him so long to come clean.
Why did he plead not guilty when he was indicted on insider trading in 2013 and again in 2014, Marmaro asked. “You’d been living with this for five years, and you were still OK to go on living with it?”
He got DeCinces to admit he’d stopped maintaining his innocence only after his conviction, when prosecutors offered the cooperation deal.
“I was in protective mode, to protect Jim [Mazzo] and myself and others,” DeCinces said.
During most of a day of direct examination, prosecutor Waier had DeCinces describe his baseball and business career. She then took him through a series of emails and meetings with Mazzo, and DeCinces’ subsequent purchases of Advanced Medical stock.
After quitting baseball in 1988, DeCinces became a real estate developer and investor, owning partnerships in several Ruby’s Diners, building a number of custom homes and developing a golf course in Irvine, he told Waier. He also had several stock brokerages accounts, for himself and his grandchildren.
He said he met Mazzo at a party on the private beach connected to the exclusive Laguna Beach neighborhood, Irvine Cove, where they both live. They developed “a mutual, strong relationship,” DeCinces said, once going on vacation together in Italy.
Although he had lost money on some Advanced Medical shares in 2006, he bought more in early November 2008 based on advice from another Irvine Cove friend, Richard Pickup, a successful stock broker and investor. Pickup said he’d heard Mazzo make an impressive presentation on a business news show about a successful refinancing deal that cut his company’s debt by $90 million.
A couple of weeks later, as they drove to an Anaheim Ducks hockey game, DeCinces asked Mazzo about the refinancing and whether more such deals were in the works.
“I remember Jim hesitated a little bit,” DeCinces said. Then he said he was “hoping it could happen by the end of the year.”
Over the next several days, DeCinces bought nearly 12,000 more shares of Advanced Medical. He said he acted based on “knowledge gained from Dick Pickup, my broker and the previous conversation I’d had with Jim.”
In mid-December, the men met at Mazzo’s house. DeCinces said Mazzo wanted to discuss something with him but asked him to keep it between the two of them.
“He told me he had received an offer to sell his company” to Abbot Labs for more than $20 a share. At the time, Advanced Medical was selling for around $8.
The next day, DeCinces said, he told his stock brokers to be much more aggressive about investing in Advanced Medical. When Waier asked why, DeCinces replied that it was because of “information I learned from Jim Mazzo.”
Finally, on Jan. 4, 2009, the men and their wives met for dinner at their country club. Walking out through the parking lot afterwards, Mazzo leaned over to DeCinces and asked him if he had enough stock in Advanced Medical.
When DeCinces said yes, Mazzo told him they had a “once-in-a-lifetime opportunity.” As he walked off, he mouthed, “Buy more,” DeCinces said.
DeCinces did. On Jan. 12, Abbot announced it was purchasing Advanced Medical for $21.50 a share, although the company had been trading for just under $9. DeCinces made a profit of nearly $1.1 million.
“Were you worried?” Waier asked.
“I was very worried,” DeCinces said.
The next month, Mazzo showed up at DeCinces house with a letter he’d received from New York Stock Exchange investigators listing questionable trades in his company’s stock. DeCinces’ name was on the list, as were several of his friends.
“He dropped some F-bombs,” DeCinces testified.
He said he told Mazzo he had not mentioned the Abbott sale to his friends, only that Advanced Medical was worth buying.
DeCinces continued: “He said, ‘Don’t tell anybody any information about the sale. Don’t tell your lawyer; don’t tell anybody.’”
Mazzo warned him that he would be contacted by lawyers for Advanced Medical and then walked off.
“I realized my fear was about to become real,” DeCinces said. But he obeyed his friend’s command not to tell anyone.
On cross-examination, he told Marmaro that the only person he had told about the Abbott information was his attorney, before the start of the first trial in March 2017.
Marmaro was to continue his cross-examination Thursday.
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