Federal prosecutors yesterday indicted former baseball player Doug DeCinces and 3 others on criminal charges of insider trading on Abbott‘s (NYSE:ABT) $2.8 billion buyout of Advanced Medical Optics in 2009.
DeCinces, who’s already agreed to pony up $2.5 million (but admitted no guilt) to settle similar charges leveled by the SEC, allegedly learned of the impending buyout from Advanced Medical Optics’ then-CEO James Mazzo, a friend and neighbor.
DeCinces then allegedly passed the inside information on to 3 of his friends, prosecutors alleged, to make up for bad investment advice he’d given them previously.
"To put it mildly, we do not agree with the decision to bring a criminal case against Doug DeCinces," Gordon Greenberg, DeCinces’ attorney, told The Associated Press. "But the proper place to have this resolved is in the courtroom and not on the courthouse steps."
The indictment, filed in the U.S. District Court for Central California, levels 44 counts of securities fraud and wire transfer violations against DeCinces; his friend and business partner David Parker; and 2 other friends, F. Scott Jackson and Roger Wittenbach. All 4 men bought up AMO stock ahead of the buyout and sold it all the day news of the deal broke, reaping a total of about $62 million in illicit profits from the trades, according to the indictment.
"Defendant DeCinces had previously provided defendants Parker, Wittenbach, and Jackson with recommendations for investments that had gone bad. Due to their friendship and to make up for these prior bad investment recommendations, defendant DeCinces provided defendants Parker, Wittenbach, and Jackson with inside information defendant DeCinces had received from [Mazzo]," according to prosecutors.
Over the course of November and December 2008, prosecutors alleged, DeCinces and Mazzo met and spoke over the phone multiple times. Roughly coincident with those interactions, DeCinces bought up 15,000 shares of AMO stock, they alleged. DeCinces also told his physical therapist about the upcoming deal, allegedly urging the therapist to buy AMO stock as well. DeCinces later bought another 75,700 shares of AMO stock before new of the deal hit the streets. On Jan. 5, 2009, DeCinces allegedly told the physical therapist that the buyout would close in a week.
DeCinces allegedly let Parker in on the deal Jan. 5, 2009, prompting Parker to snap up a total of 15,000 shares of AMO stock, the indictment alleged. Two days later DeCinces is charged with revealing the merger to Wittenbach, who also bought up 15,000 AMO shares, according to the indictment
The AMO/Abbott deal went public Jan 12, sending AMO shares up some 143%, according to the indictment. The 4 defendants allegedly liquidated their entire portfolio of AMO stock that day; prosecutors say DeCinces reaped $1.3 million, Parker about $348,000, Wittenbach roughly $202,000 and Jackson about $140,000. Wittenbach also allegedly disclosed the deal to his sister, who bought 1,000 AMO shares and later sold them for a profit of roughly $13,000, according to the indictment.
The SEC charged DeCinces with insider trading in August 2011. The former Baltimore Orioles great later settled that case for $2.5 million. Last August the SEC also indicted Hall-of-Famer Eddie Murray and Mazzo, now a senior vice president at Abbott, on similar charges; Murray allegedly learned of the AMO/Abbott deal from DeCinces, a former teammate.