Plot Thickens in Insider Trading Case Involving Former AdvaMed ChairPlot Thickens in Insider Trading Case Involving Former AdvaMed Chair

Former Baltimore Orioles player Doug DeCinces is denying he knew that the former head of a California medtech company would benefit from allegedly sharing insider trading information about the impending sale of the company, according to published reports. 

DeCinces wants prosecutors to drop 19 insider-trading counts from his indictment in U.S. District Court in California. Prosecutors argued that it did not matter under federal insider trading laws whether DeCinces knew that James V. Mazzo, the former president, CEO and board chair of Santa Ana-based Advanced Medical Optics Inc., would benefit from his alleged activity.

The Justice Department indicted Mazzo in late September 2014, alleging that in 2009, Mazzo told his neighbor and vacation buddy, DeCinces, that Abbott Laboratories was about to buy Advanced Medical Optics. Then trading at $8 per share, Advanced Medical Optics' share price soared to $22 when news of the acquisition became public. (Mazzo became head of Abbott Laboratories' Abbott Medical Optics after the deal, and announced his retirement in 2012. He is also a former board chair of trade organization AdvaMed.)

The indictment against Mazzo further alleges thatDeCinces bought 90,700 shares of Advanced Medical Optics stock, which he sold soon after the public announcement of Abbott's offer, reaping approximately $1.3 million in profits for the former ballplayer.

The government added Mazzo's indictment to its two-year-old case against DeCinces and two others. 

The justice department indicted DeCinces on 19 counts each of insider trading and tender offer fraud, and one count each of securities fraud and money laundering. Mazzo's indictment charges him with 13 counts of insider trading, 13 counts of tender offer fraud and one count of securities fraud.

The securities fraud count carries a maximum statutory sentence of 25 years in federal prison. Each of the insider trading and tender offer fraud counts in the indictment carry a maximum statutory sentence of 20 years. The money laundering counts each carry a maximum penalty of 10 years, according to the Justice Department.

In addition, the U.S. Securities and Exchange Commission filed suit against DeCinces and three others for alleged insider trading in the matter in 2011.DeCinces settled without admitting or denying the allegations, agreeing to pay $2.5 million in fines and not contesting the IRS' seizure of what were alleged to be insider-trading profits. Defendant Fred Scott Jackson, a California real estate attorney and friend of DeCinces, also settled with the SEC without admitting or denying the allegations, returning his profits and paying a penalty, the agency said.

A trial in the SEC case against Mazzo and Utah businessman David L. Parker, also a friend of DeCinces, is scheduled for August 2015 in U.S. District Court in Santa Ana.

Nancy Crotti is a contributor to Qmed and MPMN.

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