Criminal insider trading charges dropped after a series of impromptu hearings

SANTA ANA -- In a surprise hearing ordered by a judge in a related civil case, federal prosecutors moved to dismiss a criminal insider trading case against an ophthalmology executive, ending a 10-year saga that included a 9th U.S. Circuit Court of Appeals opinion and two hung juries.

U.S. District Judge Andrew J. Guilford's dismissal of the 20-count criminal indictment against James Mazzo late Thursday prompted Guilford's colleague, U.S. District Judge David O. Carter, to sign a closely scrutinized settlement with the Securities and Exchange Commission after 90 minutes of wrangling during four visits to two courtrooms.

"Mr. Mazzo, it is a happy day for you," said Guilford, who called the attorneys' first appearance before him at 4:30 p.m. "a bit of a surprise."

Carter had minutes earlier ordered Mazzo's defense team, SEC attorneys and federal prosecutors to Guilford's courtroom, which is directly above his, after refusing to approve a settlement in the SEC civil case against Mazzo until the criminal case was resolved. The cases were assigned separately to Carter and Guilford in 2012.

"They never should have been in two different proceedings and you shouldn't be running down to the civil side when you've got a criminal judge who's served two trials and is intimately familiar with all the folks here," Carter said. "You get back up to Judge Guilford's court and pay him the courtesy."

The dramatic resolution to Mazzo's yearslong legal peril likely will be longtime defense attorney Richard Marmaro's final courtroom appearance. The head of Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates' West Coast SEC enforcement and white-collar defense practice plans to retire Dec. 31.

Marmaro told the Daily Journal on Friday the dismissal "is extremely satisfying."

"With the dismissal of the criminal indictment, Mr. Mazzo has finally received the justice that I believe he truly deserved," Marmaro said.

While the civil settlement restricts Mazzo from admitting or denying guilt, he has always maintained his innocence in the criminal case, including during hourslong testimony in both trials.

Mazzo's co-defendants, retired professional baseball player Doug DeCinces and his business partner, David L. Parker, were convicted in 2017, and DeCinces testified against Mazzo in the second trial. But the second jury again hung on all counts, and federal prosecutors said in May that they were pursuing a "global resolution."

The SEC settled with Mazzo for $1.5 million last month, but Carter refused to approve the agreement and demanded the U.S. attorney's office explain the fate of the criminal case, which had been scheduled for a third trial in February.

Joined by SEC attorneys and her co-counsel, Stephen A. Cazares, Assistant U.S. Attorney Jennifer L. Waier told Carter Thursday that her office planned to move for the dismissal of the indictment "if the settlement is accepted."

"There's no guarantees on how a third trial will come out," Waier said.

But she emphasized that the processes for the civil and criminal cases differ.

"I haven't told this to Judge Guilford because, again, it's only once you except it. So I kind of feel weird kind of talking about it here," Waier said.

Carter said the feigned separation between the SEC and U.S. attorney's office is "nonsense" and he's not "bowing to the needs of SEC."

"I hear it all the time: 'Oh, we're a separate agency of the government. We can't talk to one another.' Nonsense. You're the government. Oh, I know, your bureaucracy says you're not. The court does. I prevail," Carter said.

"I'll be here until midnight. Go up and find Judge Guilford and do something, and I'll sit here and wait for you. That's an order," Carter continued.

When they got upstairs, Guilford said he learned of their appearance "five minutes ago" when he was called to Carter's chambers.

"I'm not sure what we're up to. Can someone explain to me, recognizing that we have no court reporter?" Guilford said.

Waier said she was prepared to ask Guilford to dismiss the indictment because the U.S. attorney's office believes the SEC settlement is better than proceeding to a third criminal trial.

However, she and Lawrence S. Middleton, chief of the U.S. attorney's office's criminal division in Los Angeles, initially declined to move for the dismissal until Carter approved the settlement, with Middleton calling it "a procedural hurdle that we have to cross."

Guilford

Marmaro warned that Carter would not accept the explanation and would instead demand they return to Guilford for a dismissal, but Guilford said he couldn't proceed without prosecutors, "and I can't find their position entirely unreasonable."

The attorneys then took another elevator trip downstairs to Carter's courtroom, where he again refused to approve the civil settlement until Guilford dismissed the criminal case.

"I feel like collateral damage here, your honor," Marmaro said.

"Then sit down and get this done," Carter said.

"That's my point. I can't do that. Mr. Middleton can do it. I can't," Marmaro said.

"I don't care. Get this done and come back and see me," Carter said, ordering his court reporter to go, too. Finally, about 5:25 p.m., Waier moved for Guilford to dismiss the indictment against Mazzo with prejudice, and Guilford approved. United States v. DeCinces, 12-CR00269 (C.D. Cal., filed Nov. 28, 2012).

"We had not expected to have this done tonight," she said.

Guilford noted they'd been "through thick and thin together" and that he needed to know the status of the criminal case because he'd been holding his February and March calendar for the third trial.

"Understand my point? I've held that open forever," Guilford said.

He told Waier and Cazares: "You have fought a vigorous fight."

The attorneys then returned to Carter's courtroom, where Carter approved the SEC settlement after Mazzo said he understood it included what Carter called "a lifetime" restriction on his public statements about the case.

"Let's take the anxiety level down and get you on your way," Carter told Mazzo, who is vice chairman of Chapman University's Board of Trustees. Securities and Exchange Commission v. Mazzo, 12-CV01327 (C.D. Cal., filed Aug. 17, 2012).

Carter said prioritizing the criminal case was the correct thing to do because of the time Guilford devoted to it and the fact that Carter only knows of the trials because he read coverage in the Daily Journal.

"It had to come down on the criminal side first out of courtesy to the two years you have spent in litigation, Mr. Marmaro, on the criminal side," Carter said. "It was never going to come down on the civil side first with me not knowing and Judge Guilford not knowing what was happening on the criminal side."