Ex-MLB Player, Three Others Indicted on Insider Trading Charges

By Maria Lokshin

A federal grand jury in California Nov. 28 indicted a former Major League Baseball player and three of his friends on insider trading charges stemming from the 2009 acquisition of a medical device company by Abbott Laboratories (ABT) (United States v. DeCinces, S.D.N.Y., 12-____, 11/28/12).

The indictment, filed in the U.S. District Court for the Central District of California, charged former MLB player Douglas DeCinces with 42 counts of securities fraud, including 21 counts of insider trading and 21 counts of tender offer fraud. The indictment also named DeCinces’ friends, David Parker, Fred Scott Jackson, and Roger Wittenbach.

Advance Knowledge

According to prosecutors, DeCinces reaped roughly $1.3 million based on a tip from an executive at Advanced Medical Optics Inc. that the company was considering an acquisition by Abbott. Specifically, the executive, who was not identified, allegedly told DeCinces about Abbott’s planned tender offer for Advanced Medical. Abbott, the government said, had agreed to pay between $21 and $23 per share to acquire the company. Advanced Medical’s stock at the time was trading at $8 a share, the government said.

Based on the tip, DeCinces bought nearly 100,000 shares of Advanced Medical and sold it after the public announcement of the tender offer, prosecutors charged. In addition, DeCinces allegedly tipped Parker, Jackson, and Wittenbach about Abbott’s plans, and those defendants traded Advanced Medical stock based on the information, making roughly $690,000 in profits combined, the government said.

The indictment comes roughly a year after DeCinces, Jackson, and Wittenbach agreed to settle a parallel Securities and Exchange Commission suit over the Abbott-Advanced Medical acquisition. The defendants are scheduled to be arraigned Dec. 17 (151 SLD, 8/5/11).

‘Shocked’

The defendants were represented by: Gordon Greenberg, McDermott, Will & Emery, for DeCinces; Keith Rosenbaum, Spectrum Law Group LLP, for Parker; Thomas Bienert Jr., Bienert, Miller & Katzman PLC, for Jackson; and Mark Holscher, Kirkland & Ellis LLP, for Wittenbach.

In an e-mail to BNA, Parker’s attorney Rosenbaum said he and his client “were both shocked that he was indicted.”

“We have been focusing on the civil case brought by the SEC and believed there was no chance of an indictment given the lack of any evidence or testimony,” he added. “This is the classic ‘circumstantial case’ in which the SEC, and now regrettably US Attorney, must prove liability and guilt, respectively, by innuendo, inference, and circumstantial evidence seemingly based upon a premise that well-timed stock trading and a relationship with an insider automatically results in illegal insider trading.”

“Neither civil nor criminal liability can be imposed on such a premise,” Rosenbaum continued.

The other attorneys did not respond immediately to a request for comments.

By Maria Lokshin