Doug DeCinces, the former Baltimore Orioles third baseman, was charged with making $1.3 million in illicit profit through insider trading ahead of the 2009 acquisition of Advanced Medical Optics Inc.
DeCinces, 60, was indicted yesterday in federal court in Santa Ana, California, with three friends accused of illegally profiting by $689,871 from his tips, according to U.S. Attorney Andre Birotte Jr. in Los Angeles. DeCinces paid $2.5 million in August to resolve a Securities and Exchange Commission civil lawsuit over his purchase of Advanced Medical Optics shares before it was acquired by Abbott Laboratories (ABT:US) for $2.8 billion.
A former Orioles teammate of DeCinces, Hall of Famer Eddie Murray, paid $358,151 in August to settle an SEC suit that said he profited from the tips. Murray denied wrongdoing in settling the case. Prosecutors didn’t charge him with any crimes.
“To put it mildly, we do not agree with the decision to bring a criminal case against Doug DeCinces,” Gordon Greenberg, his lawyer, said in an e-mailed statement. “But the proper place to have this resolved is in the courtroom and not on the courthouse steps.”
The indictment accused DeCinces of getting tips from a source identified as an officer and director of American Medical Optics who was involved in negotiations over the acquisition. The source was a close friend and neighbor of DeCinces and a member of his golf club. They vacationed together, and the source invested in a business run by a son of DeCinces, according to the indictment.
The source learned of the deal through various meetings with insiders, including Abbott’s chief executive officer, according to prosecutors. The indictment outlines a series of meetings and phone calls in November and December 2008, when the source allegedly provided DeCinces with tips. DeCinces began buying the first block of Advanced Medical Optics shares on Nov. 5, 2008, and continued until Jan. 5, 2009, prosecutors said.
DeCinces bought a total of 75,700 shares through various brokerage accounts, including four for his grandchildren, according to the indictment. On Jan. 12, after the Abbott acquisition was announced, Advanced Medical Optics shares rose 143 percent and DeCinces sold all of his holdings, prosecutors allege.
An SEC complaint filed in August added Murray and two others to the case, including former Advanced Medical Optics CEO James V. Mazzo. The SEC identified Mazzo as the source. In a court filing yesterday, Mazzo denied providing material, nonpublic information to DeCinces. He demanded a jury trial.
DeCinces is charged with 21 counts of insider trading and 21 counts of tender offer fraud. He also is charged with money laundering. He faces as many as 20 years in prison on the most serious charge.
DeCinces, of Laguna Beach, California, played Major League Baseball from 1973 to 1987. Besides the Orioles, he played for the California Angels and St. Louis Cardinals, hitting 237 career home runs. An SEC complaint filed in August 2011 said he was the president and CEO of a real estate development firm in Irvine, California.
That complaint said the source of the tips was an employee of Santa Ana-based Advanced Medical Optics who was “directly involved” in the transaction. DeCinces and his three tippees agreed to pay more than $3.3 million to settle the case.
Mazzo’s answer to the complaint yesterday said he was involved in the Abbott negotiations and attended many of the meetings cited. It said he and DeCinces “communicated with one another, and belonged to the same Orange County golf club.”
He denied most of the rest of the case while making various admissions, including that “Eddie Murray’s name and telephone number appeared in Mr. Mazzo’s electronic contact list.”
Mazzo is senior vice president, Medical Optics, and is retiring at the end of the year, said Adelle M.Infante, a spokeswoman at Abbott.
DeCinces liquidated his stock portfolio to buy Advanced Medical Optics shares and passed the information on to three of his friends to make up for prior investment advice that had gone bad, according to the indictment.
The case is U.S. v. DeCinces, U.S. District Court, Central District of California (Los Angeles).
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