It was early evening Dec. 6, the calm after a rare storm in Orange County. There was flooding throughout the region.
The Balboa Island Ferry was shut down. Then the rain stopped, and skies cleared.
A perfect metaphor.
Jim Mazzo and his lawyers, Securities and Exchange Commission attorneys and federal prosecutors were in court together, shuttling up and down the elevators at Santa Ana’s Ronald Reagan Federal Building between courtrooms of Judge David Carter and Judge Andrew Guilford.
At stake: the settlement of two concurrent legal cases involving one of OC’s most prominent business leaders—cases dating to events a decade ago.
Carter needed to sign off on the SEC deal, a settlement crucially involving no admission of guilt from Mazzo, but still resulting in a $1.5 million fine and a five-year ban on being a director or chief executive of a publicly traded company.
Guilford held dominion over the criminal case. Two prior trials ended in hung juries. In the second jurors voted 10-2 to acquit the former Advanced Medical Optics Inc. chief executive on counts of insider trading and perjury, of tipping former neighbor and friend, ex-Angel infielder Doug DeCinces to a pending January 2009 takeover of AMO by Abbott Laboratories.
It had been 10 years since the Abbott takeover and the beginning of the SEC’s probe. But Mazzo’s legal odyssey would be over in 10 minutes.
Prosecutors moved to dismiss the case.
“I accept that,” said Guilford.
Mazzo’s lead attorney Richard Marmaro, partner at the Los Angeles office of Skadden, Arps, Slate, Meagher & Flom LLP, had one more request.
“Your honor, defense respectfully asks that we get in the record,” the 43-year trial veteran said, that “the dismissal will be with prejudice,” meaning that the charges cannot be brought again.
“The dismissal is with prejudice,” said Guilford.
Then Guilford told the defendant: “Mr. Mazzo, you must be very happy.”
Feels Like a Win
The legal parties then shuttled down the elevator to see the decorated Marine, Judge Carter. Two days earlier, the judge demanded to know if the civil and criminal deals were part of a “global resolution.”
“I want transparency if the government is going to dismiss this case,” Carter said.
Now he had it.
“Thank you for the transparency,” Carter told all parties. “You’ve got a much different judge you’re dealing with.”
“Where is that document you’d like me to sign?” Carter asked. “I’ll sign it tonight.”
Then the hellish decade for one of Orange County’s most popular business executives was over.
“You have to understand what we’d been through for 10 years,” Marmaro told the Business Journal. “Two criminal trials, two jury deliberations at which his liberty was at stake…you have to understand what he’s facing.”
It’s been a “very challenging 10-year period,” Marmaro said. “You can’t describe the feeling when the criminal charges were dismissed.”
A God Shot?
Observers of the saga remain divided on whether Mazzo caught “a God shot,” a legal miracle.
The first criminal trial, co-defendant DeCinces was found guilty of multiple counts of insider trading.
“Any insider trading case where the government wins convictions of the tippee…yes, it’s surprising,” said Jason de Bretteville, of the first jury deadlocking on Mazzo’s fate.
De Bretteville, who leads the white-collar department of Newport Beach-based Stradling Yocca Carlson & Rauth PC, has tried many insider trading cases, and went to Mazzo’s first criminal trial.
He agreed with prosecutors that Mazzo, the alleged tipper, didn’t personally profit from the use of material nonpublic information.
“That’s the first version of insider trading liability,” the Stradling lawyer said, “That’s where the tipper breaches. The wrongdoing is by the tipper.”
As an example, he cited a case where Salomon Brothers executives were convicted of insider trading in a scandal that led to the dismantling of the once venerable investment bank.
“The second version is where the information is misappropriated by the tippee,” de Bretteville said.
And there it becomes a gray area as to whether the executive is liable for that misappropriation.
During both criminal trials, Mazzo’s lawyers always maintained their client simply never tipped.
In the second trial, where DeCinces became the government’s witness, Marmaro pointed to the lack of credibility of the former baseball player and to Mazzo’s claims of innocence.
Mazzo’s defense team contends that DeCinces had other friends and colleagues tout the former Angels third baseman onto AMO stock, including investor Richard “Dick” Pickup, who had been buying AMO shares for several years.
Pickup, like DeCinces and Mazzo at the time, was a resident of Irvine Cove in Laguna Beach. He’s known as an investor with the Midas touch, the “Warren Buffet of Orange County.”
Marmaro also argued that DeCines traded based on Mazzo’s behavior. In late 2008, on multiple occasions the chief executive cancelled plans with his neighbor DeCinces, including “skipping a movie date,” which Marmaro reminded jurors was what DeCinces told SEC lawyers on January 17, 2009.
Other Mazzo no-shows, jurors were told in closing arguments, came when Mazzo had to meet with company lawyers. Such actions would not rise to the standard in the Securities & Exchange Act of 1934, of knowingly disclosing “MNPI,” material nonpublic inside information.
Marmaro didn’t act like winning a dismissal of the criminal case was a God shot.
“It was not my toughest case,” he said, but reflecting on a long career, “it’s always toughest though to represent an innocent man.”
Marmaro knows something about God shots.
He defended former Broadcom Chief Financial Officer William Ruehle in the same courthouse. Ruehle faced 380 years in federal prison for his alleged role in an options backdating scheme involving the chipmaker. But after eight weeks of testimony, jurors never got the case. Judge Cormac Carney shockingly dismissed all charges for prosecutorial misconduct, stating “Mr. Ruhle, you are a free man.”
It was a phrase that later became the title of a book that Ruehle wrote recounting his 2009 ordeal.
Unlike Ruehle’s case, we’ll never get a firsthand account about the case from Mazzo.
Witness List
“I have never had a client in all my years of doing white-collar, criminal defense who had so many potential character witnesses. Fifty people volunteered to come to court to testify under oath,” Marmaro said.
Marmaro chose five, the limit: Chapman University President Emeritus Jim Doti; longtime Allergan Inc. Chief Executive Officer David Pyott, and three former Mazzo colleagues who are today either high-ranking executives or consultants to Orange County’s most valuable public company, Edwards Lifesciences Corp.: Aimee Weisner, Diane Biagianti and Sheree Aronson.
Such testimony in a high-profile, federal prosecution isn’t without peril and character attacks.
“Mr. Mazzo has given Chapman University a ton of money,” Assistant United States Attorney Jennifer Waier noted to Doti.
“Money does not buy my opinion,” Doti replied.
Mazzo’s lawyers also chose Weisner, general counsel for Edwards (NYSE: EW) and formerly an executive vice president for Mazzo at AMO.
“He treats people in a way that makes you want to do better,” Weisner testified.
“Jim is one of the most enthusiastic positive people I have ever met,” Pyott said in an email last week from Switzerland, where he was visiting his son and family. “[He’s] a very reliable and honest business colleague, as well as a true friend.”
George Wall met the former AMO chief executive on the golf course about five years ago.
“Great guy. Very likeable,” the Newport Beach lawyer said. Wall, the head of M&A at Century City-based Glaser Weil Fink Howard Avchen & Shapiro LLP, has been a close friend of Mazzo’s since. When prosecutors moved for a third criminal trial against Mazzo, Wall spent weeks drafting a letter opposing the plan and recruiting signatories.
“Just didn’t think it was fair to Jim and his family,” Wall said.
A who’s who of Orange County executives signed onto “When is Enough Enough?” published on the penultimate page of the Business Journal on April 16.
Signatories included Broadcom co-founder Henry Samueli and his wife, philanthropist Susan Samueli, along with bond kings Bill Gross and Bill Podlich, Hot Pockets inventor and University of California-Irvine benefactor Paul Merage, hombuilder and philanthropist Ron Simon, and FivePoint Communities Chief Executive Emile Haddad.
Did anyone say no?
“No one,” Wall said. “A number of them said, ‘Let me get you some more people.’”
Last Words
In February, attorney Marmaro told Trial II jurors that “this community honors and respects Jim Mazzo. [His] life has been turned into a nightmare with prosecutors charging him with something he did not do.”
“It’s time to end this nightmare once and for all,” he said.
But it took Mazzo, his lawyers and Judge Carter another ten months—and a notable concession from the executive—before the nightmare ended.
Carter had urged all sides to put a time stamp on the SEC’s Clause 11, which essentially prohibits Mazzo from talking about the case or run the risk of civil charges being filed again.
“It does not expire,” a government lawyer told Carter.
“I can’t accept that,” Carter told all participants. “Mr. Mazzo this puts you in a precarious position.”
SEC lawyers told Carter they couldn’t do a rewrite right away, right there in Courtroom 9D.
Team Mazzo would have to bite the bullet and their tongues if they wanted a deal that night.
“If you’ll sign a waiver that for a lifetime your client will comply with this decree, Carter told Marmaro, I’ll sign the agreement.”
It had been ten years.
“Mr. Mazzo I want to hear it from you,” Carter implored. “You understand this is for a lifetime?”
“Yes, your honor,” Mazzo said.
As a result, it’s likely the last words we’ll hear from Mazzo on either the SEC settlement or the criminal trials.
Mazzo, for those reasons, could not comment for this story.
Staying Busy
Mazzo remained in demand throughout the legal ordeals.
He stayed on at Abbott for months after the SEC charges were announced August 2012.
There were also stints at well-funded startups like AcuFocus Inc. and a two-year term as chairman of AdvaMed, the medical device industry’s chief lobbying group.
Bill Link, who founded American Medical Optics, hired Mazzo at venture capital firm Versant Ventures.
He “gives us great confidence in the value he will add to our organization and portfolio companies,” Link said of the hire.
Mazzo was appointed AMO’s founding chief executive in 2002 after 22 years at Allergan, where he had risen to president of the company’s global surgical business. At AMO, he grew the company and his reputation as a dealmaker.
“We’re not shy,” Mazzo said after one of those deals, the $450 million buy of Lasix-surgery company, Visx Inc.
The culmination came when Abbott bought AMO in 2009 for $2.8 billion, a 500% premium to AMO’s market value.
This coming year will be Mazzo’s 39th year in the medical device and ophthalmic industries, exclusively working for and leading national and multinational companies—an eye-popping parlay of a B.S. in Zoology from California State University-Long Beach.
Doti met Mazzo 20 years ago at the behest of former Allergan Chief Executive Gavin Herbert.
“Gavin thought so highly of him,” Doti said, “and I was immediately impressed with Jim as a person and as a business leader, my go-to guy whenever I had question[s] on strategic planning and initiatives. We would not have a pharmacy school at Chapman were it not for his strategic involvement in its early stage development.”
Mazzo’s counsel to Doti, appointment as vice chairman of Chapman’s board of trustees and his current role as global president of ophthalmology at Carl Zeiss Meditec AG all came during the legal maelstrom.
“Keen ability to set conflict aside,” said Bill Carpou, president and chief executive of OCTANe, the Aliso Viejo-based technology accelerator.
OCTANe’s two annual summits boast star-studded lineups: Medtronic PLC Chief Executive Omar Ishrak and sight-restoring hero and co-founder of The Himalayan Project Dr. Geoffrey Tabin. Allergan Chief Executive Brent Saunders and Samueli held open Q&A sessions at the forums this year.
Such a lineup has Mazzo’s fingerprints all over it.
“His reputation has held up,” Carpou said. “His connections in the healthcare world are like nothing I’ve ever seen before.”
Carpou and OCTANe board members, like so many others, stuck by Mazzo—Carpou nominated Mazzo to be OCTANe’s next chairman. That role begins next month.
“But we wanted the [legal] matter cleared up,” said Carpou, a former operating partner at private equity giant Blackstone.
“We didn’t give him a free pass.”
Within five minutes of the two agreements, Carpou had a unanimous vote and a new boss.
“When you’ve got people you like and respect and trust, you stick by them.”
