Laguna businessman indicted in insider-trading case that includes ex-Angels player DeCinces

A federal grand jury Wednesday indicted a Laguna Beach resident and former eye care company CEO on charges of insider trading, according to a U.S. Department of Justice news release.

James V. Mazzo, who from 2002 to 2009 was CEO of Santa Ana-based Advanced Medical Optics, Inc., which was traded on the New York Stock Exchange under the symbol EYE, was added to an indictment that includes former Angels player Doug DeCinces and two of his associates, the release said.

Mazzo, 57, is now chairman and CEO of Versant Ventures’ company AcuFocus, according to Versant’s website.

The case, which initially was filed in 2012, alleges that Mazzo was the source of non-public information that DeCinces, also of Laguna Beach, and his associates used to trade EYE stock in the midst of a takeover bid by Abbott Laboratories. DeCinces, 64, is president and CEO of an Irvine real estate development firm.

Mazzo, in a statement from his attorney, Richard Marmaro, denies the charges.

“Mr. Mazzo has a spotless reputation for professionalism, integrity, and service to his community, built up over a career of 30 years,” Marmaro said in the statement. “The notion that he would put all that at risk to give a single friend inside information is absurd. Any claim that he engaged in unlawful conduct is totally baseless.”

Newport Beach resident Fred Scott Jackson, 68, a real estate attorney and friend of DeCinces, and Provo, Utah, resident David Parker, 62, a former friend and business partner of DeCinces, also are named in the superseding indictment, according to the Justice Department’s release.

The 41-count indictment filed Wednesday in U.S. District Court charges Mazzo with providing DeCinces with confidential information in advance of Abbott’s 2009 acquisition of Advanced Medical Optics. DeCinces and his associates allegedly used the non-public information to purchase EYE shares, which increased from approximately $8 to $22 as a result of the acquisition.

DeCinces is suspected of purchasing 90,700 shares of EYE stock, which he sold soon after Abbott’s tender offer for the company was publicly announced, and receiving approximately $1.3 million in profits.

The indictment also alleges that DeCinces provided inside information about the Abbott tender offer to five other individuals who also purchased EYE stock.

DeCinces allegedly gave the tip to Parker and Jackson, in part, to make up for prior investment recommendations that had gone bad.

A call placed to DeCinces’ office seeking comment Thursday morning was not immediately returned.

After purchasing EYE shares and selling them following the acquisition, Parker allegedly realized illegal profits of $347,920 and Jackson allegedly obtained illegal profits totaling $140,259, the release said.

The indictment further alleges that Mazzo previously provided DeCinces with inside information in relation to Advanced Medical Optics’ 2007 acquisition of an Irvine medical device company, IntraLase Corp.

DeCinces allegedly used this inside information to purchase IntraLase stock, and to tip a friend to purchase shares, ahead of the announcement that Advanced Medical Optics was purchasing the company. IntraLase’s stock rose approximately 10% after the announcement of the deal.

“The government has not alleged that Mr. Mazzo traded on inside information or profited from any trades by others,” Marmaro said. “Nor has the government alleged any possible reason why Mr. Mazzo would have done so.

“Instead, the government claims that, for no apparent reason, he decided to give one friend non-public information about a corporate deal. The truth is that Mr. Mazzo never disclosed material, non-public information to Mr. DeCinces or any other investor — not to give a trading advantage to a friend, not for any reason.”

Marmaro characterized Mazzo as a person of integrity and professionalism who has served the community in many ways.

The United Cerebral Palsy of Orange County honored Mazzo with its Impact Award for his community leadership and ongoing support of the nonprofit through his efforts to establish a new vision clinic to treat children with cerebral palsy and other disabilities, Marmaro said.

“Mr. Mazzo takes seriously his responsibility to shareholders, the trading public, and the community at large, and he would never betray their trust,” Marmaro said.

Mazzo, DeCinces, Parker and Jackson will be arraigned in U.S. District Court in Santa Ana, most likely on Oct. 6, though no date has been officially set, Thom Mrozek, public affairs officer for the U.S. Attorney’s Los Angeles office, wrote in an email.

The indictment charges Mazzo with 13 counts of insider trading, 13 counts of tender offer fraud and one count of securities fraud.

DeCinces is charged with 19 counts of insider trading, 19 counts of tender offer fraud, one count of securities fraud and one count of money laundering.

Parker and Jackson are each charged with three counts of insider trading, three counts of tender offer fraud, and one count of securities fraud. Parker additionally faces one count of money laundering and criminal forfeiture.

The securities fraud count carries a maximum statutory sentence of 25 years in federal prison. Each of the insider trading and tender offer fraud counts in the indictment carry a maximum statutory sentence of 20 years. The money laundering counts each carry a maximum penalty of 10 years.

The Securities and Exchange Commission has a pending civil lawsuit in relation to the EYE insider trading scheme.

DeCinces settled that case without admitting or denying the allegations, agreeing to pay $2.5 million in fines and not contest the Internal Revenue Service’s seizure of what were alleged to be insider trading profits.

Jackson, without admitting or denying the allegations in the lawsuit, also settled with the SEC, returning his profits and paying a penalty. A trial for Mazzo and Parker is scheduled for August 2015 in U.S. District Court in Santa Ana.