Prosecutors Seek Third Insider-Trading Trial of CEO

SANTA ANA, Calif. (CN) — Federal prosecutors in Orange County, Calif., told a judge Tuesday that they want to put a CEO on trial a third time on charges he passed insider stock tips to former baseball star Doug DeCinces.

A jury last May deadlocked 8-4 in favor of convicting James Mazzo, former chief of Applied Medical Optics, of telling his friend and Laguna Beach neighbor DeCinces that his company would soon be bought out by a larger medical device company at a hefty share price premium. That jury did convict DeCinces of 14 counts of insider trading.

In February, a second jury hung again. Despite testimony from DeCinces describing in detail how Mazzo had urged him to buy Advanced Medical stock before the acquisition, the new jury voted 10-2 in favor of acquittal.

On Tuesday, Assistant U.S. Attorney Stephen Cazares told U.S. District Judge Andrew J. Guilford that he and his superiors in Los Angeles want to try Mazzo again.

In consultation with “the front office, including the U.S. attorney” for the Central District of California, they had concluded “that it is appropriate to retry Mr. Mazzo.”

He said that the most recent trial only took about 11 and a half court days and that the prosecution’s case could be “shored up” and “trimmed” for any retrial.

Guilford said he had concerns about retrying a criminal case that began in 2012 involving conduct that occurred in late 2008 and early 2009.

Abbott Laboratories purchased Advanced Medical in January 2009 for $22 a share, although the company’s stock had been trading at about $8 a share. DeCinces made a profit of about $1.3 million on his stock purchases, and friends and family members together gained an equal amount.

“I do wonder how many times you can seek a retrial,” the judge said.

Cazares argued that the first and second trials against Mazzo weren’t really the same. While the first trial relied on circumstantial evidence showing DeCinces purchased stock immediately after several meetings with Mazzo, in the second trial, DeCinces testified about the meetings and disclosed what Mazzo said.

In addition, prosecutors charged Mazzo with four counts of perjury for the second trial, based on his testimony asserting his innocence in the first trial and at other times.

“A jury hasn’t heard the same case twice,” Cazares told the judge.

A defense attorney for Mazzo, Clifford Sloan of Skadden, Arps, Slate, Meagher & Flom’s Washington, D.C., office, argued against a second retrial.

“This is the first we’ve heard of this,” Sloan said about the prosecution’s plan. “We do think the retrial should not go forward.”

After two hung juries, he said, “there’s no reason to expect a different result.”

He also argued that some of the prosecution evidence in the second trial contradicted evidence in the first trial. For instance, DeCinces insisted on the stand that he never told any of his friends or relatives that Abbot was going to buy Applied Medical. In the first trial, he was convicted of passing the insider information to a friend.

Sloan also complained about the burden the long-running case has placed “on the court, the criminal justice system, the jurors, the witnesses and Mr. Mazzo … who has been living under this burden for almost 10 years.”

Guilford noted that the Securities and Exchange Commission also has a civil suit pending against Mazzo over the alleged insider trading. That case has been put on the back burner until the criminal case is resolved.

“The court the SEC proceeding is in front of has been asking me for years and years when it could resume work on the case,” Guilford said, referring to U.S. District Judge David O. Carter in Santa Ana. “With some disappointment, I must tell him, ‘Not yet, not yet, not yet.’”

Guilford gave Sloan until March 23 to file a motion asking the court to use its “inherent oversight authority” to dismiss the charges against Mazzo. The judge set a hearing on that motion and others for April 30.

As to a retrial, he said, “I’ve not come to a conclusion on that. I want to think about it a little more.”

The judge and attorneys agreed that any retrial would not take place until June.



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