Charges of Insider Trading Hound Baseball Player Doug DeCinces, 3 Others

Jack Humphrey, Regulatory journalist
August 05, 2011 /

The Securities and Exchange Commission has charged former professional baseball player Doug DeCinces and three others with insider trading ahead of a company buyout, illegally profiting more than $1.7 million when Abbott Park, Ill.-based Abbott Laboratories Inc. announced its plan to buy Advanced Medical Optics Inc. through a tender offer.

The SEC previously charged three Swiss entities for engaging in insider trading. Accordingly, non-public information about the acquisition of Connecticut-based Arch Chemicals Inc. by Swiss-based Lonza Group Ltd was leaked to the unnamed firms before the July 11 announcement. The said firms allegedly profited millions of dollars from their sale of the recently-purchased shares of Arch common stock.

On the other hand, the SEC claimed DeCinces, from Laguna Beach, Calif., received confidential information about the Advanced Medical Optics acquisition from a source at Santa Ana, Calif.-based Advanced Medical Optics.

According to the SEC’s complaint filed in U.S. District Court for the Central District of California, DeCinces knew that his source was under a duty to keep the information confidential.

“Time and again, we see reputable people engaging in insider trading and risking their good names in order to enrich themselves and those around them,” said Daniel Hawke, Chief of the SEC Division of Enforcement’s Market Abuse Unit and Director of the Philadelphia Regional Office.

“People need to understand that we are watching for suspicious trading activity, and they will pay a heavy price when we catch them insider trading.”

The SEC alleged that DeCinces immediately began to purchase shares of Advanced Medical Optics in several brokerage accounts, buying more throughout the course of the impending transaction as he received updated information from his source. During this time, DeCinces also illegally tipped three associates who traded on the confidential information – physical therapist Joseph Donohue, real estate lawyer Fred Scott Jackson, and businessman Roger Wittenbach.

Donohue was DeCinces’s physical therapist at the time of the illegal trading. He bought 5,000 shares of Advanced Medical Optics stock in December 2008 and January 2009 using confidential information received from DeCinces about the impending transaction. Donohue made $75,570 when he sold the stock on the same the announcement was made.

Meanwhile, DeCinces and Jackson shared business and social interests. During a breakfast meeting in January 2009, Jackson bought 8,500 shares of Advanced Medical Optics stock through his mobile device on the basis of the confidential information that DeCinces gave him. Jackson bought additional shares later that day and again the next day, and following the public announcement sold all of his shares, profiting $140,259.

DeCinces and Wittenbach have been longtime friends,the SEC’s complaint added. After DeCinces tipped Wittenbach with confidential information about the impending transaction, Wittenbach bought 15,000 shares of Advanced Medical Optics stock on January 8. He also called his sister and recommended that she buy 1,000 shares of the stock, which she did later that day.

In the weeks preceding the public announcement, DeCinces bought Advanced Medical Optics stock on several occasions, eventually totaling at least 83,700 shares in several brokerage accounts he controlled. Some of these accounts were in his grandchildren’s names. On at least one occasion, DeCinces funded his purchase of shares by liquidating a diverse portfolio of 110 stocks.

When a public announcement was made by the companies on January 12, 2009, the stock price for Advanced Medical Optics increased 143 percent, and DeCinces sold all of his shares for $1.2 million in profits.

On the same day, Wittenbach sold all of his shares for a profit of $201,692. He again called his sister and told her to sell her stock, which she did for a profit of $13,214.

Without admitting or denying the SEC’s allegations, DeCinces agreed to pay disgorgement of $1,282,691, prejudgment interest of $19,311, and a penalty of $1,197,998 for a total of $2.5 million.

Donohue agreed to pay disgorgement of $75,570 and a penalty of $37,785 for a total of $113,355.

Jackson agreed to pay disgorgement of $140,259, prejudgment interest of $12,508, and a penalty of $140,259 for a total of $293,026.

Wittenbach agreed to pay disgorgement of $201,692, prejudgment interest of $5,768, and a penalty of $214,906 for a total of $422,366. The settlements are subject to final approval by the court.

The SEC was assisted by the Financial Industry Regulatory Authority (FINRA) in its continuing investigation into the insider trading case.

 

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