Neighborly Advice Or Insider Trading? Federal Trial Against Retired Baseball Player Underway

LAGUNA BEACH, CA — Was it great advise or insider trading? That's what a Santa Ana federal jury will need to decide in the case of former California Angels third baseman Doug DeCinces, along with his ex-CEO neighbor and friend.

The retired baseball player earned $1.3 million from stock trading as the Great Recession crushed the stock market based on illegal insider-trading tips -- or because he took the advice of the "Warren Buffett" of Orange County.

Attorneys started with their opening statements on Thursday in the trial of DeCinces, the 66-year-old who played for the Angels from 1982-87, his friend, David Parker, and James V. Mazzo, the former chief executive of Santa Ana-based eye care company, Advanced Medical Optics Inc.

DeCinces' attorney, Kenneth Julian, painted a picture of a boy growing up in Northridge dreaming of playing in the major leagues who ultimately supplanted Hall of Famer Brooks Robinson and married his childhood sweetheart.

Julian said when the market crashed in 2008, DeCinces essentially "fired" the brokers who managed his stocks and turned to the guidance of another friend and golfing buddy, Richard Pickup, who the defense attorney said was a humble multi-millionaire who made his fortune betting on undervalued stocks.

Pickup, who was known to still wash his own car on Saturday mornings, liked to walk over to the beach and go over stock reports, Julian said.

DeCinces, his neighbor, would join him and ask his friend for advice as the markets crashed, Julian said.

DeCinces downsized from a diversified portfolio of more than 200 stocks to 28, like Pickup. The two had the same top five stocks -- AMO, included, Julian said.
"The evidence in this case is going to show that not only did the government not do their homework, they cheated on their exam," Julian said.

The defense attorney accused the FBI of not reporting Pickup's claims of advice to DeCinces in the agency's criminal reports on the case.

Julian also pointed to multiple financial advisers, including Standard and Poors and Merrill Lynch, who said AMO's stock was undervalued at the time and considered it a "strong buy."

Julian claimed that Pickup and DeCinces benefited from researching the company from public reports and then buying low and selling high.

Prosecutors painted a different picture, alleging that Mazzo, who had information about a business merger, shared it with DeCinces before it was public knowledge in exchange for help getting into the exclusive Big Canyon Country Club in Newport Beach.

Mazzo's company was planning to acquire IntraLase Corp. so DeCinces sold all of his shares in Mazzo's company and picked up IntraLase stock, prosecutors allege.
After the news went public, DeCinces sold the new shares and made about $33,000, prosecutors allege.

Prosecutors also contend that Mazzo tipped DeCinces in the summer of 2007 about Mazzo's company's attempt to acquire Bausch and Lomb, prompting DeCinces to sell $250,000 of that stock and acquire Bausch and Lomb shares hours before the plans were announced.

Prosecutors also allege Mazzo tipped DeCinces in late 2008 and early 2009 about his company's plan to be acquired by Abbott Laboratories, prompting the ex-ballplayer to liquidate his stocks, invest the profits in Mazzo's company and then pass along the inside information to several others.

After Abbott's acquisition, DeCinces made a profit of about $1.3 million selling his friend's company's shares, prosecutors allege.

Next week, Eddie Murray, DeCinces' old teammate and friend when they were on the Baltimore Orioles, will testify in the case.

Murray also received a tip from DeCinces on the AMO stock and later settled an insider-trading claim from the Securities and Exchange Commission for $358,151 without admitting wrongdoing.

Assistant U.S. Attorney Stephen Cazares told jurors that DeCinces lived just 350 yards, or "a four-minute walk," away from his Laguna Beach neighbor, Mazzo, at the time of the alleged insider-trading deals.

He showed jurors photos of the friends with their wives at charity dinners and on vacation in Italy.

Cazares presented a largely circumstantial case built around meetings, emails and phone conversations between the two followed by DeCinces making transactions on the market related to Mazzo's company.

Advanced Medical Optics was in a "crisis" when the markets crashed in the fall of 2008, Cazares said. The company had $1.55 billion in debt and was at risk of banks calling in the loans.

Mazzo's company's stock tumbled from $23 a share in September of $2.88 in a few weeks, Cazares said.

The company also had to report that its earnings prediction fell short of the mark, the prosecutor said.

The company's executives turned to Goldman Sachs for help and their banker found a "white knight" in Abbott Laboratories in Chicago, which was gobbling up the company's stock and wanted to acquire AMO, Cazares said.

The prosecutor detailed how Mazzo's talks with Abbott corresponded with DeCinces' trading decisions, saying evidence will show the retired third baseman and real estate developer was acting on inside information.

Then DeCinces started telling his friends, family and even a physical therapist about the stock, netting a total of $2.6 million in profits for all of them, Cazares said.

Eddie Murray took in $234,915 with the stock tip, the prosecutor said.
When New York Stock Exchange officials grew suspicious of the traders and began inquiries, Mazzo lied about knowing Murray and another of DeCinces' friends, who also profited from the stock, Cazares said.

City News Service contributed to this report.

Photo, courtesy WikiCommons, Dman41689