Defense argues government key witness is reason to dismiss all charges

SANTA ANA — An attorney for a corporate CEO accused of insider stock trading cited on Monday the prosecution’s key witness as a reason to dismiss all charges, one of several arguments to be decided before the second trial begins next month.

Clifford M. Sloan of Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates used the new, incriminating statements from his client James Mazzo’s former co-defendant when arguing for the dismissal of all charges based on a Rule 29 motion originally brought during the first trial.

Sloan, and Mazzo’s trial attorney, Skadden partner Richard Marmaro, renewed the motion, which U.S. Judge Andrew J. Guilford rejected last May. They did so after they learned Mazzo’s former friend, Doug DeCinces, a retired Major League Baseball player, is cooperating with prosecutors.

A jury in May convicted DeCinces of 14 counts of tender offer fraud but split 8-4 in favor of convicting Mazzo, a longtime orthopedic corporate executive who is a vice chairman of Chapman University’s Board of Trustees. U.S.A. v. DeCinces et al., 12-CR00269 (C.D. Cal., filed Nov. 28, 2012).

Sloan told Guilford on Monday that DeCinces’ statements, included in a superseding indictment against Mazzo, show prosecutors didn’t have enough evidence to convict Mazzo during the first trial.

Prosecutors emphasized five points when they argued against the Rule 29 motion during the first trial, including alleged conversations involving Mazzo and previous stock purchases by DeCinces, all of which DeCinces’ statements now show to be false or irrelevant to what DeCinces says occurred, the defense attorneys argued.

“It is now clear in light of those five points that the government’s evidence at the first trial was a house of cards, and each of those cards has been shown to be false and erroneous,” Sloan said. “What the government wants to do now is say, ‘Oh, but look, we have this new deck of cards, and we can prove it at the next trial.’”

In response, Assistant U.S. Attorney Stephen A. Cazares said DeCinces’ statements confirm the overall theory he and his fellow prosecutors presented at trial: Mazzo told DeCinces proprietary information about the 2009 sale of Mazzo’s company, Advanced Medical Optics, to Abbot Laboratories.

Cazares said DeCinces’ statement is not newly discovered evidence, and the Rule 29 motion must be considered based on the record at the time it was brought, which was long before DeCinces’ cooperated with prosecutors.

Guilford took the matter under submission, with other pre-trial motions, including motions to compel grand jury transcripts and to sever Mazzo’s perjury charges from his 16 tender offer and securities fraud charges.

Prosecutors obtained a fourth superseding indictment this month that added three perjury charges after Marmaro moved to dismiss the original perjury count based on duplicity because it addressed multiple statements.

Assistant U.S. Attorney Jennifer L. Waier said in her opposition that the original charge was proper, but that the new indictment makes that argument moot by separating the statements. Mazzo pleaded not guilty to the new indictment on Monday.

Sloan told Guilford that trying Mazzo for perjury at the same time as the insider trading charges would be “massively unfair” because it would alert jurors to his previous trial, and it would essentially “criminalize Mr. Mazzo’s defense.”

“We’re not aware of any other case where there has been a perjury prosecution after a hung jury,” Sloan said.

Guilford asked if that wouldn’t still be the case if the perjury charge was severed. Sloan said no, because in one trial, the charges would pervade each other, and the perjury charge would affect whether Mazzo testifies regarding the insider trading charges.

“In a sense, that happens in every criminal case,” Guilford said.

“In a sense it does, your honor, but this is adding a new problem and magnifying it by a million,” Sloan answered.

Regarding the motion to compel grand jury transcripts, Guilford’s first question addressed the fact that the U.S. attorney’s office released transcripts from earlier grand juries but won’t release transcripts from the grand jury for the second trial.

“Is it suspicious that you won’t do the same for the second?” Guilford asked Cazares.

“Different circumstances, your honor, different testimony witnesses, and the government’s intentions regarding what we’re presenting at trial at that time are different,” Cazares answered.

Sloan said the differences “highlight the need” to release the latest transcripts.

Marmaro and Sloan’s motion to compel notes that they brought motions to dismiss previous indictments based on false and misleading statements contained in the transcripts, but the U.S. attorney’s office convened new juries and filed superseding indictments before the motions were heard.

“The government’s sudden reversal of practice is especially troubling in light of what the previous grand jury transcripts have disclosed,” the motion states.

Their motion warns of dire implications beyond Mazzo’s case.

“If the government’s gambit were to work, it would be able to commit misconduct before grand juries with impunity — knowing that, if challenged, it could always simply supersede an indictment and then hide behind the veil of grand jury secrecy even though the factors supporting it in that context are relatively insignificant,” the motion states.