SANTA ANA, Calif. (CN) — A federal judge declared a mistrial Wednesday after the jury deadlocked on whether a Southern California CEO gave insider trading tips about his company’s merger to retired Major League third baseman Doug DeCinces.
The jury hung 10 to 2 in favor of acquitting James Mazzo, former CEO of Advanced Medical Optics, of 16 insider trading charges and four perjury charges, according to the clerk for U.S. District Judge Andrew J. Guilford, who presided over the five-week trial. Guilford declared a mistrial.
In a brief emailed statement, Mazzo’s lead attorney said Mazzo was “gratified by the result” in the case. Richard Marmaro, with Skadden, Arps, Slate, Meagher & Flom, said the attorneys “continue to believe in Jim Mazzo’s innocence.”
A spokesman for the federal prosecutors declined to comment on the jury deadlock.
A separate jury in May last year also deadlocked on whether to convict Mazzo, 60, of telling DeCinces that Advanced Medical was to be acquired in January 2009 by Abbott Laboratories, at more than twice the market price per share. That jury voted 8 to 4 to convict Mazzo.
Mazzo was accused of urging DeCinces, his friend and Laguna Beach neighbor, to buy Advanced Medical stock when it was trading for $5-$8 a share. DeCinces bought thousands of shares and scored a profit of about $1.3 million when Abbott acquired the company for about $22 a share.
Several of DeCinces’ friends and relatives together earned another $1.3 million based on his advice to buy the stock.
That earlier jury convicted DeCinces of 14 counts of insider trading, and hung 8-4 on other counts brought against him. His attorney, Kenneth B. Julian of Manatt, Phelps & Phillips, said he could not comment on the jury deadlock.
Taking the stand in January in Mazzo’s retrial, the former Baltimore Orioles and California Angels star described in detail three meetings at which Mazzo allegedly revealed the Abbott acquisition and other confidential developments that would have helped his struggling company.
DeCinces, 67, did not testify in his own defense in the first trial. He told the new jury that he decided to admit his guilt this time around because he was suffering from health and emotional problems and worrying his family, all caused by keeping the secrets.
Marmaro claimed that DeCinces had bought the Advanced Medical stock because of recommendations from an expert stock picker he knew — not because of insider tips from Mazzo.
Mazzo’s attorneys claimed DeCinces made up the stories about insider tipping to get a lenient sentencing recommendation from the U.S. Attorney’s Office.
Marmaro presented a cooperation agreement between prosecutors and DeCinces — who was facing five years in federal prison — in which they promised to recommend a sentence of just two years. And if DeCinces provided “substantial assistance,” prosecutors promised to recommend an even lighter sentence, including perhaps no prison time at all, Marmaro told the jury.
Assistant U.S. Attorney Stephen Cazares dismissed that theory as “nonsense” in his closing argument last week. If DeCinces were actually innocent, Cazares said, it made no sense for him to admit guilt to reduce his sentence rather than appeal his conviction.
Marmaro showed the jury evidence that DeCinces’ stock trades in Advanced Medical and other companies closely matched trades by the expert stock picker, Richard Pickup. He said Mazzo got nothing in return for the alleged insider tip, that Mazzo’s other close friends and relatives did not profit from the Abbott merger, and that Mazzo has a sterling reputation as an executive and philanthropist in Orange County.
Marmaro presented 10 witnesses to testify to Mazzo’s good character. Their testimony alone should raise a reasonable doubt about his client’s guilt, he told the jury.
A well-known federal defense attorney in Orange County said the jury’s deadlock shows how difficult it is for prosecutors to prove insider trading. “You basically have to plumb the mind of the people involved,” H. Dean Steward said.
Steward, who early in the case represented a DeCinces friend who was not charged criminally, said he thinks it’s courageous of the U.S. Attorney’s Office to bring such cases, knowing how difficult they are to win.
Guilford did not set any dates for further motions or for DeCinces to be sentenced, according to his clerk.
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