Convicted ballplayer to be key witness

SANTA ANA — The U.S. attorney’s office has a key new witness in the retrial of a corporate executive accused of insider stock trading: former co-defendant Doug DeCinces, the retired professional baseball player convicted after the first trial in May.

DeCinces’ cooperation prompted prosecutors to revamp their case against James Mazzo in a superseding indictment to which he pleaded not guilty on Monday. U.S. District Judge Andrew J. Guilford postponed the start of Mazzo’s trial from next week to January at the request of his lawyers Richard Marmaro and Clifford M. Sloan of Skadden, Arps, Slate, Meagher & Flom LLP and Associates.

Sloan said they needed more time to address what’s now “a fundamentally different theory of the case.”

“For 8 1/2 years, Mr. DeCinces has maintained adamantly that Mr. Mazzo gave him absolutely no insider information,” Sloan said. “Now we have a dramatic reversal.” Assistant U.S. Attorney Stephen A. Cazares opposed the length of the continuance but said he and the other prosecutor “do understand that this is a curve ball to the defense and that they have some things to adjust.”

Guilford, a committed baseball fan, interjected.

“It’s a curve ball, or it’s a fastball high and inside — either metaphor,” he said.

Mazzo’s new indictment reduces his tender offer and securities fraud charges from 26 to 16 and adds an additional count of lying in court. The last charge stems from Mazzo’s testimony in the first trial, in which he denied telling DeCinces proprietary information about the sale of his company, Advanced Medical Optics, to Abbott Laboratories.

DeCinces bought stock in Advanced in the months before the acquisition, then sold it soon afterward for a $1.3 million profit. About 20 of his associates made another $1.3 million from similar purchases and sales. United States v. DeCinces et al., 12-CR00269 (C.D. Cal., filed Nov. 28, 2012).

Sloan told Guilford that Skadden may move to sever the new indictment and have the perjury charge tried separately.

“We just got this on Thursday,” Sloan said. “We are trying to understand the full ramification of the legal issues.”

DeCinces’ sentencing date has not yet been scheduled. Under U.S. sentencing guidelines, he faces a standard range of at least 41 months to 51 months based solely on the amount of money he made.

Prosecutors can increase that range based on other factors such as the scope of the crime and his failure to accept responsibility but they also can decrease it if he cooperates. It took eight years to bring the case to trial, which lasted two months.

DeCinces’ lawyer, Kenneth B. Julian of Manatt, Phelps & Phillips LLP, declined comment Monday.

The same jurors who convicted DeCinces and co-defendant David L. Parker split 8-4 in favor of convicting Mazzo, who is a top executive in the optics industry and the vice chairman of Chapman University’s Board of Trustees.

Cazares is prosecuting the cases with Assistant U.S. Attorneys Jennifer L. Waire and Ivy A. Wang. Their case in the first trial was based on circumstantial evidence and outlined nearly a dozen encounters between Mazzo and DeCinces in which the two were alleged to have discussed insider information about the sale.

The new indictment focuses instead on two conversations between DeCinces and Mazzo in which DeCinces said Mazzo encouraged him to buy stock in Advanced Medical Optics.

In the first, DeCinces said Mazzo told him he was working on a deal to sell his company to Abbott and that DeCinces needed to keep the information to himself. In the other, DeCinces said Mazzo approached him after a dinner at the Big Canyon Country Club in Newport Beach and asked if DeCinces had enough Advanced Medical Optics stock, to which DeCinces responded, ‘Yes, I am comfortable with my position.’”

“Mazzo then told DeCinces that DeCinces needed to purchase more AMO stock and that this was a ‘once in a lifetime’ opportunity to purchase AMO stock,” according to the indictment.

Sloan noted that DeCinces’s new statements contradict statements he made in a March 2009 interview with Skadden attorneys that was the subject of a previous pretrial motion.

Mazzo’s lead attorney at the time, Eric S. Waxman, said he’d destroyed notes from his interview with DeCinces and that he didn’t take notes when he interviewed Mazzo, but Skadden later found notes from both interviews, as well as notes by another Skadden partner, Peter B. Morrison, and Waxman retired.

Morrison was listed as a prosecution witness in the first trial, but he did not testify.

It’s unclear how the notes could factor into Mazzo’s new defense.