Pro golfer Phil Mickelson was named as a relief defendant Thursday in a case brought by the Securities and Exchange Commission related to insider trading charges against a professional sports gambler who allegedly made $40 million based on illegal stock tips on Dean Foods from a corporate insider who owed him money.
The SEC alleges that the sports gambler, William “Billy” Walters of Las Vegas, was owed money by then-Dean Foods Co. board member Thomas C. Davis.
According to the SEC complaint, Davis regularly shared inside information about Dean Foods with Walters in advance of market-moving events, using prepaid cell phones and other methods in an effort to avoid detection.
The SEC further alleges that while Walters made millions of dollars insider trading using the confidential information, he provided Davis with almost $1 million and other benefits to help Davis address his financial debts.
The SEC says that Mickelson traded Dean Foods’ securities at Walters’ urging and then used his almost $1 million of trading profits to help repay his own gambling debt to Walters.
While Walters and Davis are charged with insider trading, Mickelson is named as a relief defendant, and is not accused of wrongdoing or violating securities laws.
Mickelson neither admitted nor denied the allegations in the SEC’s complaint and agreed to pay full disgorgement of his trading profits totaling $931,738.12 plus interest of $105,291.69.
Phil Mickelson’s lawyers, Gregory Craig of Skadden, Arps, Slate, Meagher & Flom and Pat Swan of Jones Day, said in a statement that “Phil has not been charged with insider trading. Phil was an innocent bystander to alleged wrongdoing by others that he was unaware of. Phil is innocent of any wrongdoing.”
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Walters and Davis.
“As we charge in our complaint, Walters illegally reaped tens of millions of dollars with the benefit of the ultimate ace in the hole – confidential information leaked by a sitting board member of a public company,” said Andrew Ceresney, director of the SEC’s Enforcement Division, in a statement. “Additionally, Mickelson will repay the money he made from his trading in Dean Foods because he should not be allowed to profit from Walters’ illegal conduct.”
After certain suspicious trades had been identified, the SEC says, its investigation “analyzed years of trading data and other information and followed the leads back to Walters and Davis, including their use of a variety of prepaid cell phone numbers.”
According to the SEC’s complaint, Walters provided Davis with a prepaid cellular phone to use when he shared inside information about Dean Foods. Walters further instructed Davis to refer to Dean Foods as the “Dallas Cowboys” during conversations.
— Check out SEC: Advisor Bilked Pro Athletes to Fund Movie Projects on ThinkAdvisor.