Executive accused of insider trading settles SEC case

SANTA ANA -- An executive accused of insider trading will pay $1.5 million to settle a Securities and Exchange Commission case against him, according to a new agreement.

The proposed final judgment regarding James V. Mazzo, filed this week, is awaiting the signature of U.S. District Judge David O. Carter of Santa Ana.

Under the agreement, Mazzo does not admit wrongdoing, but he will be prohibited from serving as an executive in a publicly traded company for the next five years.

His third trial on a 20-count indictment is scheduled for Feb. 12, but the assistant U.S. attorneys Stephen A. Cazares and Jennifer L. Waier said in a recent filing they're negotiating a "global resolution."

A deal in the criminal case would raise questions about how prosecutors will handle the sentencing of Mazzo's former friend Douglas DeCinces, a retired professional baseball player who testified for the prosecution after jurors convicted him of 14 counts of felony tender offer fraud.

DeCinces said Mazzo in late 2008 told him about the pending sale of his company, Advanced Medical Optics, to Abbott Laboratories and encouraged him to buy stock. DeCinces sold his stock after the purchase for $1.3 million. About 20 of his associates made another $1.3 million.

But DeCinces' post-conviction cooperation apparently didn't help prosecutors much. The jury that heard his testimony voted 10-2 in February in favor of acquitting Mazzo on eight counts of securities fraud and eight counts of tender offer fraud as well as three counts of perjury for his testimony in the first trial.

They also split 9-3 in favor of acquittal on a single, broader perjury charge. United States v. DeCinces et al., 12-CR00269 (C.D. Cal., filed Nov. 28, 2012).

U.S. District Judge Andrew J. Guilford in May rejected a motion for acquittal from Mazzo's lawyer, Richard Marmaro, but he also criticized prosecutors for proceeding, writing that they were "apparently ignoring two previous juries' conclusions about the merits of the case."

Mazzo's insurance paid for his legal defense, but the SEC judgment prohibits him from accepting "reimbursement or indemnification from any source, including but not limited to payment made pursuant to any insurance policy" related to his $1.5 million fine.

Marmaro, of Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, told the Daily Journal on Wednesday, "Pursuant to our agreement with the SEC, we will have no comment on the settlement." Securities and Exchange Commission v. Mazzo et al., 12-CV01327 (C.D. Cal., filed Aug. 17, 2012).

The longtime defense attorney focused on the credibility of DeCinces and Mazzo in the second trial.

He called several of Mazzo's close friends to testify about his reputation and propensity for honesty, including Orange County heavyweights David Pyott, founder of Botox-maker Allergan plc, and Chapman University President Emeritus James Doti. Mazzo is the vice chairman of Chapman's Board of Trustees, and he worked for Allergan before Advanced Medical Optics spun off from it.

Marmaro hammered DeCinces as greedy and opportunistic, grilling him in all-day cross examination about his changed story and eliciting testimony from DeCinces that he knew his friend David L. Parker was innocent but said nothing as he was convicted.

DeCinces also said under questioning from Marmaro that he knew his former co-defendants Roger Wittenbach and F. Scott Jackson, an attorney at Jackson Tidus ALC, were innocent too but also did nothing to help them.

Prosecutors adjusted their second case in chief to fit DeCinces' statements, and the changes were big.

The first trial focused in part on two prior stock trades by DeCinces that also coincided with Advanced Medical Optics business activity, and prosecutors implied he betrayed Mazzo by buying too much and attracting federal attention.

The trades were central to the first case: Guilford initially ruled they couldn't be used, but the 9th U.S. Circuit Court of Appeals reversed him.

However, when DeCinces spoke with prosecutors, he told them the trades had nothing to do with Mazzo, and neither was mentioned in the second trial.