Having denied any investigation as “inflammatory and speculative” when the Phil Mickelson insider-trading brouhaha initialy erupted two years ago, it appears the golfer’s lawyers may have to shift from the “deny deny deny” defense to “let’s make a deal.” Having been unable to pin anything on Wall Street insider Carl Icahn, Vegas sports gambler Billy Walters, and pro-golfer Mickelson with regard their trading in Clorox (during Icahn’s takeover bid); the SEC has arrested Walters and announced criminal charges against Dean Foods’ Chairman Thomas Davis (who stepped down after suspicions of leaking insider tips) and after generating nearly $1million in profits from the Dean Foods trading tip Phil Mickelson is charged with insider trading and wilb be forced to disgorge ill-gotten gains.
Two yesars ago, the denials were quick to come…
“We do not know of any investigation,” Mr. Icahn said on Friday. “We are always very careful to observe all legal requirements in all of our activities.” The suggestion that he was involved in improper trading, he said, was “inflammatory and speculative.”
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“Phil is not the target of any investigation. Period,” said a lawyer for Mr. Mickelson,
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When asked to comment about the investigation, Mr. Walters, reached by phone on Friday, said, “I don’t have any comment about anything,” and then hung up.
Today, Mickelson’s lawyers are aggressively providing no comment as it appears he was unable to dodge another bullet for his day-trading prowess.
As NYTimes Dealbook reports, Federal authorities announced criminal charges on Thursday against the former chairman of Dean Foods and a high-rolling sports gambler with ties to prominent athletes and corporate executives, a surprising escalation of a long-running insider-trading investigation.
William T. Walters, often considered the most successful sports bettor in the country, was arrested by the F.B.I. in Las Vegas on Wednesday. Thomas C. Davis, the former chairman of Dean Foods who stepped down last year after being suspected of leaking insider tips to Mr. Walters, also faces charges.
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Preet Bharara, the United States attorney in Manhattan, who led a sweeping crackdown on insider trading, lamented “a potential bonanza for friends and family of rich people.”
But in charging Mr. Walters and Mr. Davis with securities fraud, his office is sending a message to Wall Street and beyond that these cases can still be made. The charges could also become a test case in just how far prosecutors can go in the wake of the appellate court ruling.
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Mr. Walters’s lawyer said his client had done nothing wrong. “Bill Walters is a true American success story, whose extraordinary accomplishments as a lawful sports gambler have been widely recognized and lauded,” the lawyer, Barry Berke, said in a statement. “Mr. Walters and his counsel look forward to his day in court where it will be shown that the prosecutors’ accusations are based on erroneous assumptions, speculative theories and false finger-pointing.”
Early in the investigation, federal authorities also looked at what role, if any, the billionaire investor Carl C. Icahn may have had in sharing information with Mr. Walters about the consumer products company Clorox. Mr. Icahn was mounting a takeover bid for Clorox.
But that aspect of the investigation did not bear fruit, and Mr. Icahn is not suspected of wrongdoing.
Mr. Walters’s case bridges the world of sports and finance. In the course of the investigation, federal authorities examined trades not just by Mr. Walters, but by some of his friends, including the golfer Phil Mickelson.
Mr. Mickelson, a three-time winner of the Masters golf tournament and one of the country’s highest-earning athletes, has not been accused of wrongdoing. Nor is there any indication that he will be charged.
But on at least two occasions, the F.B.I. contacted Mr. Mickelson, partly to seek his cooperation against Mr. Walters, people briefed on the investigation have previously said. Once, agents approached him on a golf course.
However, while NYTimes claims no charges, MarketWatch reports golfer Phil Mickelson on Thursday was charged with insider trading, in connection with a case where two others are facing criminal charges.
Mickelson was charged with insider trading by the Securities and Exchange Commission due to an alleged tip he received from gambler William “Billy” Walters, who got information from former Dean Foods chairman Thomas Davis.
The SEC said that Walters called, and then sent text messages, to Mickelson, who then bought a $2.4 million position in three accounts he controlled. Those securities “dwarfed” Mickelson’s other holdings, which were collectively valued at less than $250,000, the SEC said. Mickelson had not been a frequent trader and these were his first ever Dean Foods purchases, the SEC said. Mickelson made a profit of approximately $931,000 from the stock he held for about a week.
The Justice Department alleges Davis provided material non-public information to Walters, who is also charged in a separate indictment, about Dean Foods earnings results, outlook and the spinoff of Whitewave-Alpro, a Dean subsidiary.
As The SEC writes (full charge document below), The Walters Group, Nature Development, and Mickelson received the gains described above as part of, and as a consequence of, the securities law violations by Defendants Walters and Davis described above, under circumstances in which it is not just, equitable, or conscionable for them to retain the funds.
Here are the key sections from the report alleging Mickelson’s involvement:
Plaintiff Securities and Exchange Commission (“Commission”), for its Complaint against Defendants William T. Walters (“Walters”) and Thomas C. Davis (“Davis”) (collectively, “Defendants”), and The Walters Group, Nature Development B.V. (“Nature Development”), and Philip A. Mickelson (“Mickelson”) (collectively, “Relief Defendants”).
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In July 2012, Walters called professional golfer Philip A. Mickelson. Mickelson had placed bets with Walters both before and after July 2012 and owed Walters money at the time of the telephone call. At a time when Walters was in possession of material nonpublic information regarding Dean Foods, Walters communicated with Mickelson and urged Mickelson to trade in Dean Foods stock, which Mickelson did the next trading day in three brokerage accounts he controlled. About one week later, Dean Foods’s stock price jumped 40% on the announcements of the WhiteWave spin-off and strong second quarter (“Q2”) 2012 earnings, allowing Mickelson to profit by approximately $931,000.
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On one occasion, at a time when Walters was in possession of material nonpublic information regarding Dean Foods, Walters communicated with Mickelson, with whom he was friends, and urged Mickelson to trade in Dean Foods stock. Davis owed Walters money at the times he provided such information. Similarly, Mickelson owed Walters money at the time Walters urged him to trade.
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In addition to trading based on the material nonpublic information that he received from Davis, Walters sought to obtain additional benefits by tipping his friend, Mickelson, to buy Dean Foods securities. On Friday, July 27, Walters called Mickelson. The two exchanged text messages later that day, and again on July 28, 2012.
On Monday, July 30 and Tuesday, July 31, Mickelson bought, partially on margin, a total of 200,240 Dean Foods shares, a $2.4 million position, in three accounts he controlled. This position dwarfed the other holdings in the brokerage accounts, which collectively were valued at less than $250,000. Mickelson had not been a frequent trader and these were his first ever Dean Foods purchases.
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On August 8, Mickelson sold all the Dean Foods shares he had purchased on July 30 and July 31, realizing a total profit of approximately $931,000
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Relief Defendants The Walters Group, Nature Development, and Mickelson each received gains from trades based on material nonpublic information, over which they each have no legitimate claim.
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By reason of the foregoing, The Walters Group, Nature Development, and Mickelson have been unjustly enriched and must disgorge the amount of their ill-gotten gains.
Most ironically, all of this happens just hours after Phil Mickelson was announced Wednesday as the new ambassador for the CareerBuilder Challenge, the PGA Tour stop in the California desert.
Who is Mickelson taking over for? Former President Bill Clinton, whose formal relationship with the tournament through his Clinton Foundation has come to an end.
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Full charge below
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