Risk & Compliance

Gambler Charged in Dean Foods Insider Trading Case

Pro golfer Phil Mickelson was not charged but agreed to pay back the profits on the trades he made.
Matthew HellerMay 19, 2016

U.S. authorities on Thursday charged professional sports gambler William “Billy” Walters with making $40 million by trading on tips he received from a former chairman of Dean Foods who owed him money.

The Securities and Exchange Commission said Walters collaborated with Thomas C. Davis on an insider trading scheme that lasted from 2008 to 2014 and indirectly involved professional golfer Phil Mickelson, who had placed bets with Walters.

After retiring from an investment bank, Davis joined the Dean Foods board in 2001. According to the SEC, he tipped off Walters in advance of Dean public announcements in exchange for almost $1 million that the gambler provided him to help with his debts.

A Better Way to Do Ecommerce

A Better Way to Do Ecommerce

Learn how Precision Medical leveraged OneWorld to cut the cost of billing in half and added $2.5M in annual revenue.

The SEC named Walters and Davis as defendants in a civil suit and said Mickelson had agreed to disgorge $931,738 in profits on Dean Foods trades he made at Walters’ suggestion. Mickelson was not charged with any wrongdoing.

“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,” Andrew Ceresney, director of the SEC’s Enforcement Division, said in a news release.

In a parallel case, federal prosecutors on Thursday announced criminal securities fraud charges against Walters and Davis, who pleaded guilty and admitted to his participation in the scheme earlier this week.

The SEC said the tips Davis gave Walters included Dean’s earnings information for the second and fourth quarters in 2008, the first and third quarters in 2010, and the first and second quarters of 2012. Davis also allegedly alerted Walters as Dean Foods prepared to spin off its WhiteWave Foods subsidiary into a separate company.

When the board member didn’t have any market-moving information about Dean to share with Walters, he gave him tips about the strategic plans of Darden Restaurants, the SEC said.

“Walters allegedly traded in advance of good news and bad news alike,” Preet Bharara, U.S. attorney in Manhattan, said. “As alleged, it was all good news for Walters, because he had the information before everyone else — he had tomorrow’s headlines today.”