Source: https://www.scribd.com/document/103158276/comp-pr2012-159
Timestamp: 2016-09-26 12:35:14
Document Index: 387524317

Matched Legal Cases: ['§ 78', '§ 78', '§ 240', '§ 78', '§ 240', '§ 78', '§ 240', '§ 78', '§ 240', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 240', '§ 78', '§ 240', '§ 78', '§ 240', '§ 78', '§ 240', '§ 78', '§ 78', '§ 78', '§ 78']

comp-pr2012-159
BrowseBrowseInterestsBiography & MemoirBusiness & LeadershipFiction & LiteraturePolitics & EconomyHealth & WellnessSociety & CultureHappiness & Self-HelpMystery, Thriller & CrimeHistoryYoung AdultBrowse byBooksAudiobooksComicsSheet MusicBrowse allUploadSign inJoinBooksAudiobooksComicsSheet MusicWelcome to Scribd! Start your free trial and access books, documents and more.Find out more1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28DANIEL M. HAWKE Email: HawkeD@sec.gov ELAINE C. GREENBERG Email: GreenbergE@sec.gov COLLEEN K. LYNCH Email: LynchCK@sec.gov G. JEFFREY BOUJOUKOS Email: BoujoukosJ@sec.gov MICHAEL J. RINALDI Email: RinaldiM@sec.gov SCOTT A. THOMPSON Email: ThompsonS@sec.gov SECURITIES AND EXCHANGE COMMISSION 701 Market Street, Suite 2000 Philadelphia, Pennsylvania 19106 Telephone: (215) 597-3100 Facsimile: (215) 597-2740 LOCAL COUNSEL: John B. Bulgozdy, Cal. Bar No. 219897 Email: BulgozdyJ@sec.gov SECURITIES AND EXCHANGE COMMISSION 5670 Wilshire Boulevard, 11th Floor Los Angeles, California 90036 Telephone: (323) 965-3998 Facsimile: (323) 965-3908 Attorneys for Plaintiff Securities and Exchange Commission UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. JAMES V. MAZZO, DAVID L. PARKER, and EDDIE C. MURRAY, Defendants. Case No. COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Plaintiff Securities and Exchange Commission (the “Commission”) alleges as follows: SUMMARY OF THE ACTION 1. This case involves unlawful insider trading by James V. Mazzo
(“Mazzo”), David L. Parker (“Parker”), Eddie C. Murray (“Murray”), and others in advance of the January 12, 2009 public announcement that Abbott Laboratories, Inc. (“Abbott”) agreed to acquire the outstanding shares of Advanced Medical Optics, Inc. (hereinafter referred to by its former New York Stock Exchange ticker symbol, “EYE”) through a tender offer (the “EYE/Abbott Transaction”). Throughout this complaint, Mazzo, Parker, and Murray will be referred to collectively as the “Defendants.” The Court has jurisdiction over this action pursuant to Sections 21A and 27 of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u-1 and 78aa]. 2. Mazzo, who at the time was the Chairman and Chief Executive Officer
of EYE, tipped material, nonpublic information about the EYE/Abbott Transaction to his friend and neighbor, Douglas V. DeCinces (“DeCinces”), before the public announcement of the EYE/Abbott Transaction. Mazzo had access to material, nonpublic information regarding the impending EYE/Abbott Transaction because he was directly involved with the transaction, and Mazzo knew that the information should be kept confidential. 3. In the weeks preceding the public announcement, Mazzo tipped
DeCinces the material, nonpublic information regarding the impending EYE/Abbott Transaction in breach of a duty Mazzo owed to EYE’s shareholders. DeCinces used the material, nonpublic information in breach of a duty. DeCinces bought 90,700 shares of EYE in several brokerage accounts he controlled on the basis of the material, nonpublic information regarding the impending EYE/Abbott Transaction that he received from Mazzo.
On January 12, 2009, EYE publicly announced that it had entered into
an agreement for Abbott to acquire EYE for $22 per share through a tender offer. On the day of the public announcement, EYE’s stock price closed at $21.50 per share, which was an increase of $12.65 per share, approximately 143% over the prior trading day’s closing price. 5. Following the public announcement, DeCinces sold the 90,700 EYE
shares for a profit of approximately $1,386,306. 6. In addition, DeCinces tipped material, nonpublic information that he
received from Mazzo regarding the impending EYE/Abbott Transaction to at least five individuals: Parker, Murray, Joseph J. Donohue (“Donohue”), Fred Scott Jackson (“Jackson”), and Roger A. Wittenbach (“Wittenbach”). After receiving the material, nonpublic information from DeCinces, Parker, Murray, Donohue, Jackson, and Wittenbach each traded EYE stock on the basis of the material, nonpublic information that he received from DeCinces. 7. Specifically, Parker bought 25,000 shares of EYE stock on the basis of
DeCinces’ tip before the public announcement. Parker sold all of his EYE stock following the public announcement of the EYE/Abbott Transaction and profited by approximately $347,920. 8. Murray bought 17,000 shares of EYE stock on the basis of DeCinces’
tip before the public announcement. Murray sold all of his EYE stock following the public announcement of the EYE/Abbott Transaction and profited by approximately $235,314. 9. Donohue bought 5,000 shares of EYE stock on the basis of DeCinces’
tip before the public announcement. Donohue sold all of his EYE stock following the public announcement of the EYE/Abbott Transaction and profited by approximately $75,570. 10. Jackson bought 11,000 shares of EYE stock on the basis of DeCinces’
tip before the public announcement. Jackson sold all of his EYE stock following the
public announcement of the EYE/Abbott Transaction and profited by approximately $140,259. 11. Wittenbach bought 15,000 shares of EYE stock on the basis of
DeCinces’ tip before the public announcement. Wittenbach sold all of his EYE stock following the public announcement of the EYE/Abbott Transaction and profited by approximately $201,692. Wittenbach also directed his sister to purchase EYE stock on the basis of the information he received from DeCinces. On the basis of his recommendation, she bought 1,000 shares of EYE stock before the public announcement, sold all of her EYE stock after the public announcement, and profited by approximately $13,214. 12. Collectively, Parker, Murray, DeCinces, Donohue, Jackson, and
Wittenbach realized $2,400,275 in illicit profits (including the trades Wittenbach directed in his sister’s account). 13. By knowingly or recklessly engaging in the conduct described in this
complaint, Mazzo, Parker, and Murray violated and, unless enjoined, will continue to violate Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5] and Section 14(e) of the Exchange Act [15 U.S.C. § 78n(e)] and Rule 14e-3 thereunder [17 C.F.R. § 240.14e-3]. 14. The Commission seeks Final Judgments: (a) permanently restraining
and enjoining Defendants from, directly or indirectly, engaging in conduct in violation of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5] and from engaging in conduct in violation of Section 14(e) of the Exchange Act [15 U.S.C. § 78n(e)] and Rule 14e-3 thereunder [17 C.F.R. § 240.14e-3]; (b) ordering Defendants to disgorge the unlawful trading profits derived from the activities set forth in this complaint, together with prejudgment interest thereon; (c) ordering defendant Mazzo to pay disgorgement and prejudgment interest with respect to unlawful trading profits obtained by DeCinces and persons tipped by DeCinces, derived from the activities set forth in this
complaint, together with prejudgment interest thereon; (d) ordering Defendants to pay civil penalties pursuant to Section 21A of the Exchange Act [15 U.S.C. § 78u-1]; (e) pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)], prohibiting defendant Mazzo from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l] or that is required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)]; and (f) granting such other and further relief as this Court may deem just, equitable, or necessary. JURISDICTION AND VENUE 15. The Commission brings this action pursuant to Section 21A of the
Exchange Act [15 U.S.C. § 78u-1] to enjoin such acts, practices, and courses of business and to obtain disgorgement, prejudgment interest, civil money penalties, and such other and further relief as the Court may deem just and appropriate. 16. The Court has jurisdiction over this action pursuant to Sections 21A and
and 27 of the Exchange Act [15 U.S.C. §§ 78u-1 and 78aa]. 17. Venue in this district is proper pursuant to Section 27 of the Exchange
Act [15 U.S.C. § 78aa]. Among other things, certain of the acts, practices, and courses of business constituting the violations of the federal securities laws alleged herein occurred within the Central District of California. DEFENDANTS 18. James V. Mazzo, age 55, currently resides in or around Laguna Beach,
California. From 2002 to 2006, Mazzo was the President and Chief Executive Officer of EYE, and, from 2006 to at least January 2009, Mazzo was the Chairman and Chief Executive Officer of EYE. Mazzo is currently an executive officer at Abbott, holding the position of Senior Vice President, Abbott Medical Optics. 19. David L. Parker, age 60, currently resides in or around Provo, Utah.
Parker is a Managing Partner and Principal at a general partnership located in or around Irvine, California, that is engaged in private equity investment, investment
banking, and venture capital transactions. Parker is also the Chief Executive Officer of a privately-held health food company headquartered in or around Draper, Utah. 20. Eddie C. Murray, age 56, currently resides in or around Santa Clarita,
California. Murray was a Major League Baseball player from 1977 to 1997. From 1977 to 1988, he was a first baseman for the Baltimore Orioles. Murray and DeCinces were Baltimore Orioles teammates from 1977 to 1981. After DeCinces left the Baltimore Orioles, DeCinces and Murray maintained, and currently have, a close friendship. RELATED PERSONS AND ENTITY 21. DeCinces, age 61, currently resides in or around Laguna Beach,
California. DeCinces was a Major League Baseball player from 1973 to 1987. Currently, DeCinces is the President and Chief Executive Officer of a real estate development firm in or around Irvine, California. 22. Donohue, age 50, currently resides in or around Trabuco Canyon,
California. Donohue is a physical therapist licensed in the State of California and is the owner of a physical therapy practice located in or around Newport Beach, California. From at least August 2004 through January 2009, DeCinces was one of Donohue’s clients. 23. Jackson, age 66, currently resides in or around Newport Beach,
California. Jackson is a real estate lawyer who has been licensed to practice law in the State of California since 1972. Jackson is a founding member and shareholder of a California law firm. 24. Wittenbach, age 70, currently resides in or around Lutherville-
Timonium, Maryland. Wittenbach is the Chairman and Chief Executive Officer of a privately-held company headquartered in or around Sparks, Maryland. 25. Advanced Medical Optics, Inc. (or “EYE”) was a manufacturer of
medical products for the eye that was headquartered in or around Santa Ana, California. It now operates as a subsidiary of Abbott called Abbott Medical Optics,
Inc. Before the January 12, 2009 public announcement that Abbott would acquire EYE through a tender offer, EYE traded on the New York Stock Exchange under the ticker symbol “EYE.” FACTS A. Mazzo Possessed Material, Nonpublic Information Regarding the Impending EYE/Abbott Transaction 26. Mazzo, as the Chairman and Chief Executive Officer of EYE, knew or
should have known that that he had a duty to the shareholders of EYE not to discuss or to disclose information about the impending EYE/Abbott Transaction to individuals outside of EYE. Also, Mazzo received company policies or procedures regarding confidentiality and insider trading, knew that he was required to abide by the policies or procedures, and agreed to do so. 27. Mazzo was directly involved in the impending EYE/Abbott Transaction
from its inception in October 2008. Mazzo knew that EYE’s Code of Ethics and its incorporated “Insider Trading Policy” clearly set forth that he had a duty not to disclose confidential information to anyone outside the company. Indeed, EYE’s Insider Trading Policy specifically identified “news of a pending or proposed merger or acquisition, or a tender offer or exchange offer,” “news of a significant sale of assets or the disposition of a significant subsidiary,” and “changes in management” as examples of what it considered to be “material non-public information.” In addition, on December 3, 2007, Mazzo signed EYE’s “Statement of Policies and Procedures For the Board of Directors,” which stated in part: “In connection with the performance of their duties as directors, Board members can expect that they may periodically (and sometimes for substantial periods of time) be in possession of non-public information relating to the business, operations, financial condition, plans or prospects of the Company. All such information must be held in strictest confidence.” (Emphasis added.)
Mazzo and DeCinces Were Close Friends Since well before Mazzo tipped DeCinces and during the relevant time
period, Mazzo and DeCinces were close friends. 29. Mazzo and DeCinces lived very close to one another in the same
neighborhood, which was part of an exclusive gated community in Laguna Beach, California. 30. Mazzo and DeCinces communicated frequently with one another, by e-
mail, in person, and through telephone calls; they and their wives socialized together often; they attended social events together; they belonged to the same Orange County country club; and they vacationed together overseas. 31. Mazzo invested in DeCinces’ son’s restaurant business. And DeCinces’
daughter provided interior decorating services for Mazzo and his wife. C. Mazzo Tipped Material, Nonpublic Information to DeCinces Regarding the Impending EYE/Abbott Transaction, and DeCinces Traded on the Basis of Mazzo’s Tip 32. During the week of October 13, 2008, an investment bank, at EYE’s
request, contacted Abbott to see if it was interested in an acquisition of or strategic transaction with EYE. Abbott expressed an interest in an acquisition of or strategic transaction with EYE. Mazzo and a senior executive of Abbott met for dinner on October 22, 2008, to discuss the possibility of an acquisition or similar merger transaction involving Abbott and EYE. 33. On October 23, 2008, Mazzo sent DeCinces an e-mail message, which
was part of a larger e-mail chain. Mazzo’s e-mail message suggested, among other things, that the two talk when DeCinces returned from a trip. 34. On October 24, 2008, Mazzo, as EYE’s Chairman and Chief Executive
Officer, executed a nondisclosure agreement between EYE and Abbott, which allowed Abbott to conduct its due diligence, and, on October 26, 2008, Mazzo and
other EYE executives met with Abbott to discuss, among other things, EYE’s business and Abbott’s level of interest in acquiring EYE. 35. On November 2, 2008, there was a telephone call between telephone
numbers associated with Mazzo and DeCinces, respectively. 36. With knowledge of the aforementioned material, nonpublic information
and his duty not to disclose it, Mazzo tipped DeCinces material, nonpublic information regarding the impending EYE/Abbott Transaction. 37. On November 5, 2008, DeCinces bought 3,500 shares of EYE on the
basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that Mazzo tipped DeCinces. 38. On November 14, 2008, Mazzo and other representatives of EYE met
with Abbott to discuss EYE’s business, historical financial results, and business strategy in greater detail. 39. On November 23, 2008, there was a telephone call between telephone
numbers associated with Mazzo and DeCinces, respectively. 40. On the evening of November 24, 2008, Mazzo and DeCinces attended a
professional hockey game together. 41. 42. On the next morning, November 25, 2008, DeCinces called his broker. On November 26, 2008, an Abbott executive informed Mazzo that
Abbott intended to forward a tender offer proposal in the next few days. 43. On December 1, 2008, an Abbott executive sent Mazzo a nonbinding,
preliminary proposal in which Abbott offered to buy EYE’s outstanding shares of common stock through a tender offer for the cash price range of $21 to $23 per share. Also on December 1, 2008, a senior executive at Abbott sent an e-mail message to Mazzo regarding the impending EYE/Abbott Transaction. 44. On December 2, 2008, members of EYE’s management team and
EYE’s Board of Directors met telephonically to discuss the proposal. Mazzo was present for this Board meeting. At the Board meeting, the Board authorized Mazzo
to agree to a limited period of exclusive negotiations with Abbott with respect to the purchase of EYE. 45. With knowledge of the aforementioned material, nonpublic information,
Mazzo tipped DeCinces material, nonpublic information regarding the impending EYE/Abbott Transaction. 46. From November 26, 2008, to December 2, 2008, DeCinces bought
11,500 additional shares of EYE on the basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that Mazzo tipped DeCinces. 47. On December 6, 2008, Mazzo and DeCinces and their wives attended a
benefit dinner to support a Newport Beach, California, hospital. 48. 49. Abbott’s due diligence of EYE began on or about December 8, 2008. During the morning of December 8, 2008, less than forty-eight hours
after attending the benefit dinner with Mazzo, DeCinces tipped his physical therapist, Donohue, with material, nonpublic information regarding the impending EYE/Abbott Transaction that DeCinces obtained from Mazzo. Also, between December 8, 2008, and December 10, 2008, there were several telephone calls between telephone numbers associated with DeCinces and his former Baltimore Orioles teammate, Murray, respectively. 50. On December 10, 2008, an Abbott senior executive (who was based out
of Illinois) met with Mazzo at Mazzo’s office in Santa Ana, California, to discuss, among other things, Mazzo’s future employment at Abbott after Abbott’s acquisition of EYE. 51. With knowledge of the aforementioned material, nonpublic information,
Mazzo tipped DeCinces material, nonpublic information regarding the impending EYE/Abbott Transaction. 52. On December 10, 2008, DeCinces placed a limit order for an additional
4,000 shares of EYE on the basis of material, nonpublic information regarding the
impending EYE/Abbott Transaction that Mazzo tipped DeCinces. This limit order was executed on December 12, 2008. 53. On December 12, 2008, EYE’s and Abbott’s respective representatives
exchanged drafts of the merger agreement and related documentation. 54. On December 15 and 16, 2008, Mazzo and other of EYE’s executives,
as well as EYE’s legal and financial advisors, met with Abbott and its legal and financial advisors. During this two-day meeting, EYE’s representatives presented Abbott with overviews of EYE’s business, historical financial results, business strategy, legal matters, and financial projections. 55. Also on December 16, 2008, Mazzo met with a senior executive of
Abbott at a private social club located in or around Costa Mesa, California. 56. With knowledge of the aforementioned material, nonpublic information,
Mazzo tipped DeCinces material, nonpublic information regarding the impending EYE/Abbott Transaction. 57. From December 15, 2008, to December 18, 2008, DeCinces bought an
additional 27,000 shares of EYE in his personal brokerage account on the basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that Mazzo tipped DeCinces. DeCinces’ stock purchase was funded, in part, by approximately $160,000 that was generated from DeCinces’ liquidation of securities (including some positions held since 2001). And, on December 17, 2008, DeCinces bought an additional 8,000 EYE shares (through accounts set up for his grandchildren) on the basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that Mazzo tipped DeCinces. 58. As of December 17 and 18, 2008, EYE’s Board planned to vote on the
merger on Monday, January 5, 2009, and to announce the merger on Wednesday, January 7, 2009.
On December 19, 2008, members of EYE management met with the
EYE Board of Directors, along with EYE’s legal and financial advisors, and advised the Board that Abbott was still targeting an early January 2009 decision. 60. On December 21, 2008, Abbott called Mazzo and confirmed that, after
completion of Abbott’s preliminary legal and financial due diligence review of EYE, the proposed purchase price remained in the range of $21 to $23 per share. 61. On December 28, 2008, Abbott called Mazzo and confirmed that it
would be willing to propose a purchase price of $21 per share. 62. During this same time period, the EYE/Abbott Transaction progressed
and several key events occurred. Among other things, between at least December 29, 2008, and January 4, 2009, Mazzo negotiated the terms of his employment agreement with Abbott. During the December 29, 2008, to January 4, 2009, time period, there were at least six telephone calls between telephone numbers associated with Mazzo and DeCinces, respectively. Among other things, soon after an approximately eighty-four minute telephone call between Mazzo and an Abbott senior executive on Saturday, January 3, 2009, there was a telephone call from a telephone number associated with Mazzo to a telephone number associated with DeCinces. 63. On or before Wednesday, December 31, 2008, the EYE Board of
Directors meeting was moved from Monday, January 5, 2009, to Thursday, January 8, 2009. 64. On December 31, 2008, Mazzo and DeCinces were at the same country
club in Orange County, California, playing golf at the same time. 65. That same day, December 31, 2008, there were at least two telephone
calls from DeCinces’ mobile telephone to Murray’s mobile telephone, at least one of which was placed while DeCinces was at the Orange County country club playing golf.
With knowledge of the aforementioned material, nonpublic information,
Mazzo tipped DeCinces material, nonpublic information regarding the impending EYE/Abbott Transaction. 67. On January 2, 2009, DeCinces bought an additional 12,500 shares of
EYE on the basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that Mazzo tipped DeCinces. 68. Shortly thereafter and also on January 2, 2009, DeCinces bought an
additional 1,200 shares of EYE on the basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that Mazzo tipped DeCinces. 69. On January 4, 2009, Mazzo reached a verbal agreement with Abbott as
to the terms of his future employment with Abbott. 70. On January 4, 2009, Mazzo and DeCinces had dinner together at a
country club located in Orange County, California. 71. With knowledge of the aforementioned material, nonpublic information,
Mazzo tipped DeCinces material, nonpublic information regarding the impending EYE/Abbott Transaction. 72. Early the next morning, January 5, 2009, DeCinces bought an additional
23,000 shares of EYE: 8,000 shares of EYE in accounts set up for his grandchildren and 15,000 shares in a personal brokerage account. These purchases were made on the basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that Mazzo tipped DeCinces. To pay for the shares DeCinces bought in his grandchildren’s accounts, DeCinces transferred $60,000 from a personal brokerage account to the four grandchildren’s brokerage accounts, dividing the $60,000 equally among them. 73. Also on January 5, 2009, the day after DeCinces’ dinner with Mazzo at
the Orange County country club, DeCinces tipped his physical therapist, Donohue, with material, nonpublic information regarding the impending EYE/Abbott Transaction that DeCinces obtained from Mazzo.
On January 5 and 6, 2009, there were also several telephone calls
between telephone numbers associated with DeCinces and Murray, respectively. Soon after one of these telephone calls, there were two calls from Murray’s mobile telephone to Murray’s broker (one call to the broker’s home telephone number, and one call to the broker’s mobile telephone number). D. 75. The January 12, 2009 Public Announcement At 5:01 a.m. Pacific time on January 12, 2009, EYE announced that it
had entered into an agreement with Abbott pursuant to which Abbott planned to acquire EYE through a tender offer of $22 per share in an all cash offer. EYE’s stock price closed at $21.50 per share, an increase of $12.65 per share, or approximately 143%, over the prior trading day’s closing price of $8.85 per share. 76. On the day of the announcement, DeCinces sold all 90,700 shares of
EYE stock (including shares acquired through the accounts for his grandchildren). DeCinces realized illegal profits of approximately $1,386,306. E. DeCinces Tipped Material, Nonpublic Information About the EYE/Abbott Transaction That He Received from Mazzo to at Least Five Individuals 77. DeCinces tipped material, nonpublic information about the
EYE/Abbott Transaction that he received from Mazzo to at least five individuals: Donohue, Jackson, Wittenbach, Parker, and Murray, all of whom traded on the basis of that information. (1) DeCinces Tipped Donohue Material, Nonpublic Information That DeCinces Received from Mazzo, and Donohue Traded on the Basis of DeCinces’ Tip 78. Donohue was DeCinces’ physical therapist from at least August 2004
through January 2009. Donohue previously had a business relationship with members of the DeCinces family in a venture that ultimately failed.
During an in-person discussion on December 8, 2008, DeCinces tipped
Donohue material, nonpublic information that DeCinces received from Mazzo. In particular, DeCinces told Donohue, among other things, that a deal would be going down, that EYE was one of the companies involved in the deal, and that Donohue should definitely call his broker. On December 9, 2008, Donohue bought 3,000 shares of EYE on the basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that DeCinces tipped Donohue (and which DeCinces had received from Mazzo in breach of a duty). 80. During an in-person discussion on January 5, 2009, DeCinces tipped
Donohue material, nonpublic information that DeCinces received from Mazzo. In particular, DeCinces told Donohue that the deal was still going through and that Donohue should hang tight. On January 7, 2009, Donohue bought an additional 2,000 shares of EYE on the basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that DeCinces tipped Donohue (and which DeCinces had received from Mazzo in breach of a duty). 81. On January 12, 2009, Donohue sold all 5,000 shares of EYE for a profit
of approximately $75,570. 82. Later, DeCinces asked Donohue whether he had sold his EYE stock and
congratulated him. (2) DeCinces Tipped Jackson Material, Nonpublic Information That DeCinces Received from Mazzo, and Jackson Traded on the Basis of DeCinces’ Tip 83. 84. DeCinces and Jackson had a social and business relationship. On January 8, 2009, DeCinces and Jackson met for a breakfast meeting
to discuss, among other things, a shared business transaction. During that meeting, Jackson used a mobile handheld device to buy 8,500 shares of EYE based on material, nonpublic information regarding the impending EYE/Abbott Transaction
that DeCinces tipped Jackson (and which DeCinces had received from Mazzo in breach of a duty). 85. Later that day, Jackson bought an additional 1,700 shares of EYE based
on material, nonpublic information regarding the impending EYE/Abbott Transaction that DeCinces tipped Jackson (and which DeCinces had received from Mazzo in breach of a duty). 86. On January 9, 2009, Jackson bought an additional 800 shares of EYE
based on material, nonpublic information regarding the impending EYE/Abbott Transaction that DeCinces tipped Jackson (and which DeCinces had received from Mazzo in breach of a duty). 87. Following the public announcement of the EYE/Abbott Transaction,
Jackson sold all 11,000 shares of EYE for a profit of approximately $140,259. (3) DeCinces Tipped Wittenbach Material, Nonpublic Information That DeCinces Received from Mazzo, and Wittenbach Traded on the Basis of DeCinces’ Tip 88. Wittenbach and DeCinces became friends when DeCinces was playing
professional baseball and living in Maryland. Since that time, Wittenbach and DeCinces have remained close friends. 89. On January 8, 2009, Wittenbach bought 15,000 shares of EYE on the
basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that DeCinces tipped Wittenbach (and which DeCinces had received from Mazzo in breach of a duty). 90. Also on January 8, 2009, Wittenbach called his sister and recommended
that she buy 1,000 shares of EYE stock. Later that day, on the basis of her brother’s recommendation, Wittenbach’s sister bought 1,000 shares of EYE on margin. 91. On the day of the public announcement of the EYE/Abbott Transaction,
Wittenbach sold all 15,000 shares of EYE for a profit of approximately $201,692. That same day, Wittenbach called his sister and told her she should sell her EYE
stock. Thereafter, she sold 1,000 shares of EYE for a profit of approximately $13,214. (4) DeCinces Tipped Parker Material, Nonpublic Information That DeCinces Received from Mazzo, and Parker Traded on the Basis of DeCinces’ Tip 92. Parker and DeCinces are friends and have been business partners in
several investments. Parker shared office space at DeCinces’ business offices, and Parker and DeCinces shared the same secretary. 93. Parker knew that DeCinces knew Mazzo. Among other things, in 2007,
Parker invited DeCinces to a political fundraiser. DeCinces attended the political fundraiser and brought Mazzo with him. Parker met Mazzo at the political fundraiser and knew that Mazzo and DeCinces were friends. 94. Between January 5 and 8, 2009, there were numerous telephone calls
between telephone numbers associated with DeCinces and Parker, respectively. During this same time period, there were numerous telephone calls between telephone numbers associated with Parker and Parker’s broker, respectively. Certain of the telephone calls between numbers associated with Parker and Parker’s broker, respectively, occurred in the evening, after business hours. 95. On January 6, 2009, Parker bought 6,000 shares of EYE on the basis of
material, nonpublic information regarding the impending EYE/Abbott Transaction that DeCinces tipped Parker (and which DeCinces had received from Mazzo in breach of a duty). Later that day, Parker bought an additional 9,000 shares of EYE on the basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that DeCinces tipped Parker (and which DeCinces had received from Mazzo in breach of a duty). 96. On January 8, 2009, Parker wired $100,000 into the brokerage account
through which he had recently purchased EYE stock and bought an additional 10,000 shares of EYE on the basis of material, nonpublic information regarding the
impending EYE/Abbott Transaction that DeCinces tipped Parker (and which DeCinces had received from Mazzo in breach of a duty). 97. Parker’s broker thought that Parker’s EYE purchases were suspicious in
part because of the large position Parker was taking in EYE. 98. On the day of the public announcement of the EYE/Abbott Transaction,
Parker sold all 25,000 shares of EYE for a profit of approximately $347,920. (5) DeCinces Tipped Murray Material, Nonpublic Information That DeCinces Received from Mazzo, and Murray Traded on the Basis of DeCinces’ Tip 99. Murray and DeCinces have been close friends since the mid-1970s and
have invested in businesses together. 100. Murray and Mazzo knew each other. Mazzo maintained Murray’s name and telephone numbers in Mazzo’s electronic contact list. 101. On January 6, 2009, Murray directed his broker to use all of the cash in his self-directed brokerage account to purchase EYE stock, and, on January 7, 2009, Murray bought 17,000 shares of EYE on the basis of material, nonpublic information regarding the impending EYE/Abbott Transaction that DeCinces tipped Murray (and which DeCinces had received from Mazzo in breach of a duty). 102. Following the public announcement of the EYE/Abbott Transaction, Murray sold all 17,000 shares of EYE for a profit of approximately $235,314. F. Mazzo, DeCinces, Parker, Murray, Donohue, Jackson, and Wittenbach Breached Their Duties to Maintain Material, Nonpublic Information in Confidence 103. The information regarding the impending EYE/Abbott Transaction that Mazzo tipped DeCinces was material and nonpublic. A reasonable investor would have viewed the information regarding the impending EYE/Abbott Transaction as being important to his investment decision or a significant alteration of the total mix of information available to the public. In addition, the information was considered
confidential by EYE, and EYE had policies or procedures protecting confidential information. 104. EYE and its employees assumed and owed a duty to EYE’s
shareholders to maintain the confidentiality of information related to the impending EYE/Abbott Transaction. 105. Mazzo learned the information regarding the impending EYE/Abbott Transaction in his capacity as Chairman and Chief Executive Officer of EYE. Mazzo knew that he owed a fiduciary duty, or other obligation arising from a similar relationship of trust and confidence, to keep the information confidential. Mazzo also knew that he was subject to written policies or procedures regarding confidentiality and insider trading. 106. DeCinces, who knowingly or recklessly received material, nonpublic information about the impending EYE/Abbott Transaction from Mazzo, assumed a duty. By trading on the material, nonpublic information DeCinces received from Mazzo, DeCinces breached a derivative duty he inherited from Mazzo to keep the material, nonpublic information confidential. In addition, by tipping material, nonpublic information DeCinces received from Mazzo to others (at least Parker, Murray, Donohue, Jackson, and Wittenbach), DeCinces breached the derivative duty DeCinces inherited from Mazzo to keep the material, nonpublic information confidential. 107. DeCinces’ tippees (at least Parker, Murray, Donohue, Jackson, and Wittenbach), each of whom knowingly or recklessly received material, nonpublic information about the impending EYE/Abbott Transaction from DeCinces, assumed a duty. When they traded on the information that they received from DeCinces, or caused another to trade on the information, DeCinces’ tippees (at least Parker, Murray, Donohue, Jackson, and Wittenbach) knew or should have known that they were breaching a derivative duty they inherited from DeCinces to keep the material, nonpublic information confidential.
Mazzo tipped the material, nonpublic information regarding the
impending EYE/Abbott Transaction to DeCinces with the expectation of receiving a benefit or as a gift to his friend, DeCinces. 109. DeCinces tipped material, nonpublic information regarding the impending EYE/Abbott Transaction to Parker, Murray, Donohue, Jackson, and Wittenbach with the expectation of receiving a benefit or as a gift to his friends, Parker, Murray, Donohue, Jackson, and Wittenbach, respectively. 110. Significantly, even in the absence of fiduciary or other duties,
DeCinces, Parker, Murray, Donohue, Jackson, and Wittenbach all had a duty to abstain from, and were prohibited from, trading given that substantial steps had been taken to commence Abbott’s tender offer to EYE’s shareholders and given that they all knew or had reason to know that the confidential information they received came from an individual closely associated with EYE, the target of the tender offer. When Mazzo tipped this confidential information about the impending EYE/Abbott Transaction to DeCinces, it was reasonably foreseeable that this communication would result in unlawful trading. In addition, when DeCinces received this confidential information about the impending EYE/Abbott Transaction and then tipped confidential information to Parker, Murray, Donohue, Jackson, and Wittenbach, respectively, it was reasonably foreseeable that this communication would result in unlawful trading. FIRST CLAIM FOR RELIEF Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder (Against All Defendants) 111. The Commission re-alleges and incorporates by reference each and
every allegation in paragraphs 1 through 110, inclusive, as if they were fully set forth herein. 112. The information concerning the EYE/Abbott Transaction was material and nonpublic. In addition, the information was considered confidential by EYE.
113. At all times relevant to the complaint, Defendants acted knowingly or recklessly. 114. Defendants learned material, nonpublic information regarding the impending EYE/Abbott Transaction and knew, recklessly disregarded, or should have known that they, directly, indirectly, and/or derivatively, owed a fiduciary duty, or obligation arising from a similar relationship of trust and confidence, to keep the information confidential. 115. By engaging in the conduct described above, Defendants, directly or indirectly, in connection with the purchase or sale of securities, by use of the means or instrumentalities of interstate commerce, or the mails, or the facilities of a national securities exchange: a. b. employed devices, schemes or artifices to defraud; made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and/or c. engaged in acts, practices, or courses of business which operated or would operate as a fraud or deceit upon any person in connection with the purchase or sale of any security. 116. By engaging in the foregoing conduct, Defendants violated and, unless enjoined, will continue to violate Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. SECOND CLAIM FOR RELIEF Violations of Section 14(e) of the Exchange Act and Rule 14e-3 Thereunder (Against All Defendants) 117. The Commission re-alleges and incorporates by reference each and every allegation in paragraphs 1 through 116, inclusive, as if they were fully set forth herein.
118. Mazzo communicated material, nonpublic information regarding Abbott’s tender offer for the securities of EYE to DeCinces. DeCinces communicated material, nonpublic information regarding Abbott’s tender offer for the securities of EYE that he received from Mazzo to at least Parker, Murray, Donohue, Jackson, and Wittenbach. 119. The communications regarding the impending EYE/Abbott Transaction between Mazzo and DeCinces and then between DeCinces and at least Parker, Murray, Donohue, Jackson, and Wittenbach, respectively, occurred under circumstances in which it was reasonably foreseeable that unlawful trading would result. 120. By November 2008, the time period during which the first trades alleged herein occurred, or by such other times when trades alleged herein occurred, substantial steps had been taken to commence a tender offer for the securities of EYE by Abbott, including, among other things: (a) senior members of EYE and Abbott met in person to discuss the possibility of a merger between the two companies; (b) EYE and Abbott entered into a nondisclosure agreement on October 24, 2008; (c) Abbott submitted, on December 1, 2008, a nonbinding, preliminary proposal to acquire EYE’s outstanding shares for between $21 and $23 per share; (d) Abbott conducted due diligence on EYE; and (e) the EYE Board held a meeting on January 5, 2009, to evaluate the proposed transaction with Abbott. 121. DeCinces, Parker, Murray, Donohue, Jackson, and Wittenbach knew or had reason to know that the confidential information that each of them received had been acquired, directly or indirectly, from EYE, the target of the tender offer, and therefore they were prohibited from trading in the securities of EYE. 122. By reason of the foregoing, Defendants violated and, unless enjoined, will continue to violate Section 14(e) of the Exchange Act [15 U.S.C. § 78n(e)] and Rule 14e-3 thereunder [17 C.F.R. § 240.14e-3].
PRAYER FOR RELIEF WHEREFORE, the Commission respectfully requests that the Court enter Final Judgments: I. Permanently restraining and enjoining Defendants from, directly or indirectly, engaging in conduct in violation of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5] and from engaging in conduct in violation of Section 14(e) of the Exchange Act [15 U.S.C. § 78n(e)] and Rule 14e-3 thereunder [17 C.F.R. § 240.14e-3]; II. Ordering Defendants to disgorge the unlawful trading profits derived from the activities set forth in this complaint, together with prejudgment interest thereon; III. Ordering defendant Mazzo to pay disgorgement with respect to unlawful trading profits obtained by DeCinces and persons tipped by DeCinces, derived from the activities set forth in this complaint, together with prejudgment interest thereon; IV. Ordering Defendants to pay civil penalties pursuant to Section 21A of the Exchange Act [15 U.S.C. § 78u-1]; V. Pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)], prohibiting defendant Mazzo from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l] or that is required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)]; and
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dated: August 17, 2012.
VI. Granting such other and further relief as this Court may deem just, equitable, or necessary. Respectfully submitted, ___________________________________ John B. Bulgozdy, Local Counsel SECURITIES AND EXCHANGE COMMISSION Daniel M. Hawke Elaine C. Greenberg Colleen K. Lynch G. Jeffrey Boujoukos (pro hac vice application to be filed) Michael J. Rinaldi (pro hac vice application to be filed) Scott A. Thompson (pro hac vice application to be filed) Attorneys for Plaintiff SECURITIES AND EXCHANGE COMMISSION
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