Former California Angels third baseman Doug DeCinces was convicted Friday on 14 counts of insider trading stemming from stock tips he received from a friend, an ex-CEO of Santa Ana-based eye care company.
Jurors deadlocked on all counts against co-defendant James V. Mazzo, 60, of Laguna Beach, DeCinces’ friend and neighbor, who was CEO of Advanced Medical Optics Inc. Another co-defendant, David Parker, 65, of Provo, Utah, was convicted on three counts of insider trading.
A sentencing date has not yet been set. DeCinces and Parker were allowed to remain free on bond until sentencing.
DeCinces faces up to 220 years in federal prison, and Parker faces up to 60 years behind bars, according to Thom Mrozek, a spokesman for the U.S. Attorney’s Office.
Jurors deliberated off and on over a week before reaching verdicts on about half of the charges. The jurors deadlocked on three insider-trading charges against DeCinces.
The split on the deadlocked charges was four for acquittal and eight for conviction.
Prosecutors said DeCinces, 66, used the stock tips to make $1.3 million as the Great Recession crushed the stock market.
DeCinces’ attorney, however, argued that his client, who played for the Angels from 1982-87, shrewdly received wise advice from a friend characterized as the Warren Buffett of Orange County.
DeCinces attorney, Kenneth Julian, said it was a “fantastic question” when asked how jurors could convict DeCinces of insider trading when the alleged source was not convicted.
“We have several grounds obviously” for a new trial motion, Julian told reporters. “We’re disappointed for everyone involved. We don’t believe this is the end.”
Jurors sent a note to U.S. District Judge Andrew J. Guilford during deliberations asking about the Securities and Exchange Commission settlement DeCinces reached with regulators. It wasn’t part of the evidence presented at trial, but it was apparently spotted in a defense exhibit.
Prosecutors argued that Mazzo, who had information about a business merger, shared it with DeCinces before it was public knowledge in exchange for help getting into the exclusive Big Canyon Country Club in Newport Beach.
Mazzo’s company was planning to acquire IntraLase Corp., so DeCinces sold all of his shares in Mazzo’s company and picked up IntraLase stock, prosecutors said.
After the news went public, DeCinces sold the new shares and made about $33,000, prosecutors said.
Prosecutors also contended that Mazzo tipped DeCinces in the summer of 2007 about Mazzo’s company’s attempt to acquire Bausch and Lomb, prompting DeCinces to buy $250,000 of Bausch and Lomb stock hours before the plans were announced.
Prosecutors additionally allege Mazzo tipped DeCinces in late 2008 and early 2009 about his company’s plan to be acquired by Abbott Laboratories, prompting the ex-ballplayer to liquidate his stocks, invest the profits in Mazzo’s company and then pass along the inside information to several others.
After Abbott’s acquisition, DeCinces made a profit of about $1.3 million selling his friend’s company’s shares, prosecutors said.
Assistant U.S. Attorney Stephen Cazares told jurors that DeCinces lived just 350 yards, or “a four-minute walk,” away from his Laguna Beach neighbor, Mazzo, at the time of the alleged insider-trading deals.
He showed jurors photos of the friends with their wives at charity dinners and on vacation in Italy.
Cazares presented a largely circumstantial case built around meetings, emails and phone conversations between the two followed by DeCinces making transactions on the market related to Mazzo’s company.
Advanced Medical Optics was in a “crisis” when the markets crashed in the fall of 2008, Cazares said. The company had $1.55 billion in debt and was at risk of banks calling in the loans.
Mazzo’s company’s stock tumbled from $23 a share in September of 2008 to $2.88 in a few weeks, Cazares said.
The company also had to report that its earnings prediction fell short of the mark, the prosecutor said.
The company’s executives turned to Goldman Sachs for help and their banker found a “white knight” in Abbott Laboratories in Chicago, which was gobbling up the company’s stock and wanted to acquire AMO, Cazares said.
The prosecutor detailed how Mazzo’s talks with Abbott corresponded with DeCinces’ trading decisions, saying that evidence showed the retired third baseman and real estate developer was acting on inside information.
Then DeCinces started telling his friends, family and even a physical therapist about the stock, netting a total of $2.6 million in profits for all of them, Cazares said.
DeCinces’ ex-teammate from the Baltimore Orioles, Eddie Murray, took in $234,915 with the stock tip, the prosecutor said.
When New York Stock Exchange officials grew suspicious of the traders and began to make inquiries, Mazzo lied about knowing Murray and another of DeCinces’ friends, who also profited from the stock, Cazares said.
Julian, however, painted a picture for jurors of a boy growing up in Northridge who dreamed of playing in the major leagues, a man who ultimately supplanted Orioles’ Hall of Fame third baseman Brooks Robinson and married his childhood sweetheart.
Julian said when the market crashed in 2008, DeCinces essentially “fired” the brokers who managed his stocks and turned to the guidance of another friend and golfing buddy, Richard Pickup, who the defense attorney said was a humble multi-millionaire who made his fortune betting on undervalued stocks.
Pickup, who was known to still wash his own car on Saturday mornings, liked to walk over to the beach and go over stock reports, Julian said.
DeCinces, his neighbor, would join him and ask his friend for advice as the markets crashed, Julian said.
Julian also pointed to multiple financial advisers, including Standard and Poors and Merrill Lynch, who said AMO’s stock was undervalued at the time and considered it to be a “strong buy.”
Julian claimed that Pickup and DeCinces benefited from researching the company from public reports and then buying low and selling high.
–City News Service