Former Professional Baseball Player and Three Associates Indicted by Federal Grand Jury in Insider Trading Case
|U.S. Attorney’s Office November 28, 2012|
SANTA ANA, CA—A federal grand jury today indicted former professional baseball player Doug DeCinces and three of his associates on insider trading charges for allegedly using non-public information regarding a takeover bid to purchase stock in an Orange County-based medical device company—stock that dramatically increased in value when the takeover bid was publicly announced.
A 44-count indictment filed this afternoon in United States District Court charges DeCinces and the others with using information that the former third baseman obtained from a high-ranking official at the medical device company to purchase stock prior to the announcement of a tender offer from an international medical company.
The indictment names:
- Douglas V. DeCinces, 60, of Laguna Beach, a Major League Baseball player from 1973 to 1987 who currently is the president and CEO of a real estate development firm in Irvine;
- David Parker, 60, of Provo, Utah, who was a friend and business partner of DeCinces;
- Fred Scott Jackson, 65, of Newport Beach, a real estate attorney who was friends with DeCinces; and
- Roger Wittenbach, 69, of Lutherville-Timonium, Maryland, another friend of DeCinces.
The allegations in this case relate to Advanced Medical Optics Inc., a medical device and eye care company headquartered in Santa Ana whose stock was traded on the New York Stock Exchange under the symbol EYE. In January 2009, EYE was acquired by Abbott Laboratories, raising EYE’s stock price from approximately $8 to $22 per share.
The indictment alleges that, during a series of meetings in the fall and early winter of 2008, “an officer and director of EYE” obtained inside information about Abbott’s planned tender offer, including that Abbott was prepared to pay $21 to $23 per share of EYE stock, which at the time was trading around $8 per share. The EYE insider—who the indictment describes as “a close personal friend” of DeCinces’—allegedly disclosed inside information regarding the tender offer during a series of meetings and telephone calls with DeCinces in the weeks leading up to the public announcement of the tender offer. During this same time, the indictment alleges, DeCinces began buying up EYE shares. According to the indictment, in December 2008, DeCinces liquidated his diverse stock portfolio at Merrill Lynch—suffering approximately $80,000 in losses—to obtain approximately $160,000 that he used to purchase EYE stock. The indictment alleges that DeCinces ultimately purchased a total of 90,700 shares of EYE stock, which he sold soon after Abbott’s tender offer for the company was publicly announced and realized approximately $1.3 million in profits.
The indictment also alleges that DeCinces provided inside information about the tender offer to three friends—Parker, Jackson, and Wittenbach—in part to make up for prior investment recommendations from DeCinces “that had gone bad.” After purchasing EYE shares and then selling them after the acquisition, Parker allegedly realized illegal profits of $347,920; Jackson allegedly obtained illegal profits totaling $140,259; and Wittenbach allegedly made $201,692 after selling his EYE shares, while his sister realized profits of $13,214.
DeCinces is charged with 42 counts of securities fraud—21 counts of insider trading and 21 counts of tender offer fraud. He is also charged with one count of money laundering.
Parker and Jackson are each charged with three counts of insider trading and three counts of tender offer fraud. Parker additionally faces one count of money laundering.
Wittenbach is charged with two counts of insider trading and two counts of tender offer fraud.
An indictment contains allegations that a defendant has committed crimes. Every defendant is presumed innocent until and unless proven guilty.
The four defendants indicted in this case are being summoned to appear for arraignments in United States District Court in Santa Ana on December 17.
Each of the securities fraud counts in the indictment carries a maximum statutory sentence of 20 years in federal prison. The money laundering counts each carry a maximum penalty of 10 years.
This investigation in this case was conducted by the Federal Bureau of Investigation and IRS-Criminal Investigation. The Securities and Exchange Commission provided assistance during the investigation.
The Securities and Exchange Commission has sued DeCinces and several others allegedly involved in the insider trading scheme. DeCinces settled with the SEC without admitting or denying the allegations in the lawsuit, agreeing to pay $2.5 million in fines and not contest the IRS’s seizure of what were alleged to be insider trading profits.