Executive accused of insider trading testifies in his defense

SANTA ANA -- A business executive in his second trial on charges of insider trading told a jury Wednesday that a 2009 acquisition of his company wasn't finalized at the time his convicted former codefendant, ex-baseball player Doug DeCinces, claims he was urged to buy more stock.

James V. Mazzo's testimony built on evidence from previous defense witnesses who told jurors of intense uncertainty surrounding the deal until days before it was finalized.

"I didn't believe that this group was going to follow through at all," Mazzo said of Abbott Laboratories, which acquired his Advanced Medical Optics in January 2009 and is now Abbott Medical Optics. Mazzo is president of global ophthalmology at Carl Zeiss Meditec.

Mazzo was testifying about a Nov. 26, 2008 email from a Goldman Sachs employee that said Abbott had made an offer to acquire Advanced, a refinancing deal was expected before the end of the year and that shares would increase in value to $22 or $23. At the time, shares were worth about $5.

In the months before the deal closed, DeCinces bought thousands of shares in Advanced and sold them for more than $1 million in profit. DeCinces' family members and friends also made more than $1 million.

Assistant U.S. attorneys Jennifer L. Waier and Stephen A. Cazares are trying to persuade jurors that DeCinces bought the shares because Mazzo told him proprietary information about the deal, and they have a key witness: DeCinces.

He was convicted of 14 counts of felony tender offer fraud last May and agreed to testify against Mazzo in exchange for the possibility of no prison time. His testimony dominated the prosecution's case, which rested last Tuesday.

Mazzo's defense team at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates is led by Richard Marmaro, with Clifford M. Sloan handling the law and motion and appellate side. Marmaro has questioned all witnesses except for the hired defense expert, who was questioned by Skadden partner Matthew E. Sloan.

Marmaro focused part of his direct examination on Mazzo's friendships with people other than DeCinces. Jurors saw photos that the jury in the first trial didn't that showed Mazzo smiling with friends at various locations.

Mazzo described a close-knit group of couples that didn't include DeCinces and his wife.

"Were you best friends?" Marmaro asked.

"No, we were not best friends," Mazzo answered.

Marmaro went through each incident in which DeCinces said Mazzo told him about the deal involving Advanced and urged him to buy more stock, and Mazzo denied DeCinces' allegations each time.

"How can you be so sure?" Marmaro asked.

"Because I would never provide material, nonpublic information," Mazzo said.

"Did you tell him there was a refinancing deal that would be done by the end of the year?" Marmaro asked.

"I would never provide confidential, nonpublic information, but there was actually no refinancing deal that was to be done at the end of the year, so the answer is no," Mazzo answered.

Mazzo's testimony echoed testimony on Tuesday from James O. Rollans, a finance executive at Advanced who described tumultuous weeks of negotiation and uncertainty regarding the Abbott deal.

Cazares' cross-examination of Mazzo continues Thursday.

U.S. District Judge Andrew J. Guilford prohibited him from mentioning the fact that DeCinces was convicted and was a defendant in a trial in which Mazzo was a defendant. The judge said he'll consider whether to allow questions about Mazzo's legal fees if they arise.

Cazares noted in a courtroom conversation outside the presence of the jury that Marmaro brought up DeCinces' legal fees in cross examination, and he wants to draw a comparison between DeCinces' situation and Mazzo's.

While DeCinces testified that his legal bills were "three times" $1 million, Cazares indicated Mazzo's are much higher because he has insurance that's paying them.

DeCinces was represented by McDermott Will & Emery and then Manatt, Phelps & Phillips LLP.

Cazares said the high-priced defense and insurance arrangement could show motivation "to continue not telling the truth to avoid repayment of possibly millions to insurance companies that have been paying for his defense for years."

DeCinces is represented by Manatt, Phelps & Phillips LLP, which defended him in trial, and he had earlier hired McDermott Will & Emery.