Judge reluctantly allows a third insider trading trial

SANTA ANA -- A federal judge on Tuesday allowed a rare third trial for an ophthalmology executive accused of insider trading, though he questioned why he doesn't have the authority to enter a not guilty verdict after the last jury hung overwhelmingly in favor of acquittal.

U.S. District Judge Andrew J. Guilford said the U.S. attorney's office is "apparently ignoring two previous juries' conclusions about the merits of the case" against James Mazzo by proceeding with a third trial, but added that nothing allows him to halt the plan.

"Despite the appealing nature of Mr. Mazzo's arguments, the oath taken by this judge requires that he apply the law as it exists," a two-page order states.

"And unfortunately, the only time the 9th Circuit addressed this issue directly, it concluded 'that the fact that a jury was hung by a six to six vote, or by one even more favorable to the defendant is not an adequate basis for dismissal under the court's supervisory powers,'" the judge wrote, citing United States v. Miller, 4 F3d 792, 794 (9th Cir. 1993).

His order denied two motions to dismiss brought by Mazzo's lawyers at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, one of which argued insufficient evidence under Rule 29 of the Federal Rules of Evidence. The other, more unusual one argued the principle of fundamental fairness warranted the dismissal of Mazzo's indictment with prejudice. United States v. DeCinces et al., 12-CR00269 (C.D. Cal., filed Nov. 28, 2012).

"Enough is enough, your honor," Skadden partner Clifford M. Sloan said at a hearing Monday. "Mr. Mazzo has had to run the gauntlet of criminal jeopardy twice. The government has given it its best effort twice. It has failed."

Sloan, of Washington, D.C, is in charge of law and motion while Skadden partner Richard Marmaro, of Los Angeles, is Mazzo's trial attorney. They were joined Monday by partners Kevin D. Lloyd and Matthew E. Sloan. Mazzo, the global ophthalmology president at Carl Zeiss Meditec, has insurance that's paying his legal fees.

Marmaro said in an email that while they are disappointed in the ruling, "we think the court's thoughtful comments highlight why this case should not be tried a third time, particularly after a 10-2 NOT GUILTY vote in the most recent trial."

Thom Mrozek, spokesman for the U.S. attorney, said in an email, "We do not have any response to the judge's order, except to say that we are pleased with the ruling."

Assistant U.S. attorneys Stephen A. Cazares and Jennifer L. Waier noted Monday that while two juries have hung regarding Mazzo's charges, "there is a convicted person in this case," and it's Mazzo's co-defendant, retired Major League Baseball player Douglas DeCinces.

The first jury convicted him and his friend and business partner David L. Parker but split 8-4 in favor of convicting Mazzo. The second jury split 10-2 in favor of acquittal on 19 charges, including three perjury charges related to Mazzo's testimony in the first trial. Jurors were 9-3 in favor of acquittal on a fourth perjury charge.

Now the prosecution's main witness against Mazzo, DeCinces testified at the second trial that he bought stock in Mazzo's company, Advanced Medical Optics, just before its January 2009 acquisition by Abbott Laboratories because Mazzo told him a sale was looming and the stock would increase in value.

DeCinces sold his stock after the acquisition for about $1.2 million in profits; about 20 of his friends, including Parker, made another $1.2 million.

Parker, who was convicted of two counts of tender offer fraud, is awaiting sentencing, but DeCinces testified at Mazzo's trial in January that he never told Parker inside information about the acquisition and that Parker was wrongly convicted.

Sloan pointed to Cazares' statement at a hearing in March that he didn't want to be in a position of "impeaching our own witnesses" when Guilford asked him about DeCinces' testimony regarding Parker.

"This is an exceptional case where the government itself is unwilling to stand behind the credibility of the witness that it wants your honor to rely on," Sloan said Monday.

Cazares said that's not true.

"Let me make it clear. The government would not have put Mr. DeCinces on as a witness in this trial if we did not believe he was credible and testifying truthfully," Cazares said.

He said DeCinces' testimony that Parker was wrongfully convicted is "an issue that the government can and will address. ... It's something we've given a lot of thought to." He said the U.S. attorney's office planned to wait until after Mazzo's third trial, "but there's now a new U.S. attorney, so I'm not certain of that."

Cazares said Guilford "probably has" the authority under the fundamental fairness principle to order prosecutors to address Parker's case within a few months. But the principle doesn't allow him to dismiss an indictment because of previous hung juries, Cazares said.

Guilford wondered why not.

"On a 9-3 vote, I can get millions and millions of dollars right across the street," Guilford said, referring to state civil cases. "But on a 9-3 vote, this gentleman can't get peace of mind."