Federal prosecutors are fighting a bid by Doug DeCinces, the ex-Orioles player accused of insider trading on information he got from former Advanced Medical Optics CEO James Mazzo, to have a raft of charges dropped from his indictment.
Mazzo is accused of tipping DeCinces about the $2.8 billion acquisition of AMO by Abbott (NYSE:ABT) and of AMO’s 2007 buyout of IntraLase. In 2012 federal prosecutors accused DeCinces of passing the inside information along to friends to make up for bad investment advice he’d given them previously.
DeCinces agreed in 2011 to pony up $2.5 million (but admitted no guilt) to settle similar charges leveled by the SEC. Last month prosecutors also indicted Mazzo. Last week DeCinces asked Judge Andrew Guilford of the U.S. District Court for Central California to dismiss 19 of the counts against him, arguing that the government can’t prove that he knew Mazzo would benefit personally from disclosing news of the AMO buyout.
"This argument is mistaken on both the law and the facts as alleged in the [indictment] because: (1) remote tippee knowledge of the benefit conferred on the insider tipper is not an element of Rule 10b-5 insider trading; and (2) even if remote tippee knowledge of the benefit received by the insider tipper must be proven to the jury, that requirement is merely a sub-element definitional jury instruction and need not be specifically alleged in the indictment; and (3) the [indictment] properly alleges the fiduciary duty element by charging that defendants DeCinces, Parker and Jackson knew Mazzo breached his fiduciary duties ( which necessarily implies a benefit received) by providing inside information to defendant DeCinces," the prosecutors argued, according to court documents.
DeCinces has also asked Guilford to compel prosecutors to detail the information allegedly leaked by Mazzo, who has denied any wrongdoing.