SANTA ANA, Calif. (CN) — A federal prosecutor and a defense attorney Tuesday gave jurors vastly different explanations of how former Major League Baseball star Doug DeCinces and 14 of his friends and family came to buy a stock in a medical device company days before it was acquired, more than doubling its share price.
DeCinces, a power-hitting third baseman for the Baltimore Orioles and California Angels, has been on trial for seven weeks on charges of inside trading in shares of Advanced Medical Optics. On trial with him are former company CEO James V. Mazzo and David L. Parker, a DeCinces friend.
Assistant U.S. Attorney Jennifer L. Waire told jurors in the first of two days of closing arguments that in the fall and winter of 2008 Mazzo disclosed material, non-public information to DeCinces about Advanced Medical Optics’ impending sale to Abbott Laboratories.
“In this case, Mr. Mazzo took — stole — insider information from Advanced Medical Optics and gave it to Mr. DeCinces, who bought thousands of shares,” Waire said.
By the time the acquisition was announced in January 2009, DeCinces had purchased 90,700 shares of Advanced Medical and made a profit of $1.3 million, she said.
He also passed the information to seven friends and relatives, who told seven more, who made a combined profit of another $1.3 million, the prosecutor said.
“They made $2.6 million because they knew tomorrow’s news today,” Waire told the jury.
DeCinces’ attorney Kenneth Julian, with Manatt Phelps & Phillips, said his client bought the stock after extensive research and by following the lead of an expert stock picker and golf buddy, Richard Pickup.
Julian told the jury the prosecution’s case was based on inference and circumstantial evidence. “There’s a chasm between the charges in this case and the evidence,” he said.
Advanced Medical, which sold a leading LASIK laser device for eye surgery, hit tough times during the financial crisis in 2008. But Abbot was eager to get into the booming ophthalmology field, Waire said. On Jan. 12, 2009, it announced it would buy Advanced Medical at a 149 percent premium, sending the share price from less than $9 to $22.
Waire told jurors that Mazzo had confided to DeCinces that his company would be acquired by the end of the year for at least $20 a share, and DeCinces told Parker and others.
During more than two hours of closing arguments, Waire worked through the details of the more than 30 counts against the three defendants.
The jury did not hear that DeCinces settled inside-trading charges with the Securities and Exchange Commission in August 2011 by paying fines and penalties of $2.5 million.
Waire took the jury through a timeline of meetings between Mazzo and DeCinces, succeeded by ever more eager stock purchases by the ballplayer.
At one point, she said, DeCinces bought 4,000 shares of Advanced Medical Optics while on a golf course. In early January 2009, after a party celebrating’ Mazzo’s employment deal to stay on as CEO under Abbott, DeCinces telephoned his broker before markets opened, seeking to make such a large purchase it had to be broken up into tranches to keep it from driving up the price.
“After Mr. DeCinces would see Mr. Mazzo, what would happen? Large purchases of shares,” Waire told the jury.
She said DeCinces’ actions fit a pattern of buying stock related to what Mazzo’s company was about to do. He bought stock in InterLase just before Advanced Medical purchased the laser surgery company, and he purchased shares of Bausch & Lomb when Advanced Medical was trying to buy that company, she said.
Waire quoted testimony by Michael R. Phelps, who said his client Parker’s purchase of Advanced Medical stock just before the Abbott deal was “too good to be true.” Phelps raised his concerns with his supervisors, she said.
Julian criticized as phony Waire’s attempts to tie Mazzo-DeCinces meetings to stock purchases. He said the prosecutor merely listed a contact and a trade and then said: “I submit that’s insider trading.”
“That’s called speculation, and that’s not allowed,” Julian said.
He showed the jury a stack of 900 pages of research reports and information about Advanced Medical that DeCinces collected in 2008, including many from stock advisers promoting the company as ripe for acquisition.
He ticked through stock purchases by Pickup — including of Advanced Medical— and similar ones around the same times by DeCinces.
In particular, Julian tore into a string of contradictions in testimony by Joseph J. Donohue, who owned the practice where DeCinces received physical therapy. Donohue, a key prosecution witness, said the ballplayer had recommended Advanced Medical to him in early December because the company was about to be acquired.
Julian said Donohue’s insider information came from another man.
Donohue purchased about 5,000 shares, but agreed to pay his $75,000 in profits to the Securities and Exchange Commission in an August 2011 deal. Because he cooperated with prosecutors, the SEC dropped a $37,500 fine against him, Waier said.
Closing arguments were expected Wednesday from Mazzo’s attorney Richard Marmaro, with Skadden, Arps, Slate, Meagher & Flom, and Parker’s attorney Jeff Tatch. Assistant U.S. Attorney Stephen Cazares will give the prosecution’s rebuttal.
In 15 seasons, from 1973 to 1987, DeCinces recorded 1,505 hits, including 237 home runs, and 879 runs batted in. His lifetime batting average was .259.