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Friday, December 8, 2023 | Back issues
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Insider Trading Trial Wrapping Up in California

A federal prosecutor told jurors Tuesday that a CEO charged with insider trading lied when he denied tipping former Orioles third-baseman Doug DeCinces to confidential information that his company, Advanced Medical Optics, would soon be acquired for a high price.

SANTA ANA, Calif. (CN) — A federal prosecutor told jurors Tuesday that a CEO charged with insider trading lied when he denied tipping former Orioles third-baseman Doug DeCinces to confidential information that his company, Advanced Medical Optics, would soon be acquired for a high price.

CEO James Mazzo’s “testimony changes with the narrative he wants you to believe,” Assistant U.S. Attorney Jennifer L. Waier said during her closing arguments in the month-long trial.

“There’s a lot of zigging and zagging,” she said of Mazzo, who is charged with 16 counts of insider trading and four counts of perjury. At various times on the stand, he expressed confusion about the meaning of terms such as “close friend,” “Minor League Baseball,” “pry” and “confidential,” she said.

He even lied about his love of baseball, Waier said, which is what brought him and DeCinces together as friends.

Mazzo’s lead defense attorney Richard Marmaro, with Skadden, Arps, Slate, Meagher & Flom, countered that it was DeCinces who lied.

“Nothing Mr. DeCinces said to save his own skin is true,” Marmaro said.

A jury in May convicted DeCinces, 67, of 14 counts of insider trading for buying thousands of shares of Advanced Medical Optics in the weeks before its January 2009 acquisition by Abbott Laboratories. The jury deadlocked on whether Mazzo had tipped his Laguna Beach neighbor DeCinces to the Abbott deal.

DeCinces, who made about $1.3 million profit on his Advanced Medical stock trades, faced up to five years in federal prison, but he admitted wrongdoing and testified against Mazzo as part of a deal with prosecutors that might let him stay free.

In two days of testimony in U.S. District Judge Andrew Guilford’s court, DeCinces said that Mazzo told him in three meetings that Advanced Medical was close to being bought out by the much larger Abbott.

In his closing argument Tuesday, Marmaro said that DeCinces maintained his innocence for almost nine years and changed his story only “when his back was against the wall, to stay out of jail.”

“The central issue in this case,” he told the jury, “is can you trust Mr. DeCinces beyond a reasonable doubt?”

Waier told the jurors that they can. Although no one else was present the three times Mazzo allegedly passed corporate secrets to DeCinces, other evidence corroborates DeCinces’ story, she said.

First, when in the depths of the 2008 recession Advanced Medical’s stock price was in the tank and the company was under pressure from creditors, Mazzo told his close friend that he was looking into a post with a different company. Emails Mazzo sent another associate confirm he was developing an exit strategy, Waier said.

Later that November, DeCinces said, Mazzo told him a refinancing deal was in the works to solve the company’s debt problems. Other evidence confirmed the refinancing effort.

Then in mid-December and early January, Mazzo revealed that Abbott was offering to buy Advanced Medical for more than $20 a share when it was selling for about $8, DeCinces testified.

In the January encounter, as the two men walked alone through a parking lot after dinner with their wives, Mazzo urged DeCinces to buy more shares of the company. Mazzo said it was “a once-in-a-lifetime opportunity,” the ballplayer recalled.

After both tips, DeCinces made a series of large purchases of Advanced Medical stock, even using trading accounts in his grandchildren’s names.

In December, he called his broker from his dying father’s hospital room to place orders. The day after the January dinner, DeCinces called his broker before the market opened and asked to buy so much Advanced Medical stock that the order had to be split up to keep from bumping up the price, Waier said.

His purchases amounted to 5 percent of the total volume of Advanced Medical shares traded that day, she said.

He also urged his son and some friends to buy shares, which they did.

Waier argued that although DeCinces had become a successful real estate developer since retiring from baseball, he couldn’t have deduced that Advanced Medical’s stock would go up so sharply “without hearing material nonpublic information from Mr. Mazzo.”

He knew “the play by play” about the company from “the coach,” Mazzo, she said.

But Marmaro scoffed at the idea that DeCinces’ trades corroborated DeCinces’ story about being tipped. DeCinces invented the conversations with Mazzo to fit the trades he’d made, Marmaro said.

“The fact that there was a trade after a made-up conversation doesn’t support the conversation,” he said.

He said DeCinces made his Advanced Medical purchases on the recommendation of another friend and neighbor, Dick Pickup, a stock picker so successful he is known as the Warren Buffet of Orange County.

While DeCinces made about $1.3 million on his Advanced Medical stock and his friends and family made nearly as much, Pickup made about $8 million on his trades, Marmaro said.

Waier argued that Pickup could not have spurred DeCinces’ large stock purchases in 2008 and 2009 because the two had no meetings that December and January.

But Marmaro countered that DeCinces did meet with Pickup’s son in mid-December, who confirmed that his father was still buying Advanced Medical.

Marmaro was to continue his closing argument Wednesday. Assistant U.S. Attorney Stephen Cazares will make a rebuttal argument.

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