Media Moves

Coverage: Walters guilty in insider trading case

April 10, 2017

Posted by Chris Roush

Insider TradingA federal jury in New York found sports gambler Billy Walters guilty on 10 counts of fraud and conspiracy Friday in an insider-trading case that featured testimony about the betting habits of PGA Tour golfer Phil Mickelson.

Matt Bonesteel of the Washington Post had the news:

Over the course of the four-week trial, prosecutors argued that Walters earned $43 million on more than 100 trades over six years based on insider tips from Tom C. Davis, the former chairman of Dean Foods Co. Davis, who pleaded guilty to perjury and agreed to cooperate with the prosecution as its star witness, testified during the trial that he became a “virtual conduit of nonpublic information” to Walters after he took $1 million from the gambler to cover betting debts and the expenses from a divorce. At one point, assistant U.S. attorney Brooke Cucinella told the jury, Walters purchased 1.5 million shares of Dean Foods just minutes after Davis left him a phone message telling him the company was spinning off part of its business and was about to report a surprisingly robust earnings announcement.

Walters’s lawyers, in turn, alleged that Davis repeatedly lied on the stand to save his own skin. They also called witnesses who portrayed their client as someone with a gift for predicting the stock market thanks to meticulous research, much like how he claimed to have won millions in Las Vegas casinos. He parlayed those winnings into businesses that include golf courses, auto dealerships and car-rental agencies with total revenue of $500 million in 2013, his company’s controller testified.

“If I would have made a bet I would have lost,” Walters, 70, told reporters as he left court, per Bloomberg. “I just did lose the biggest bet of my life. Frankly I’m in shock.

“To say I was surprised would be the biggest understatement of my life.”

Mickelson never testified during the trial (neither did Walters), but prosecutors said the five-time major winner bought almost $2 million worth of Dean Foods stock after receiving a tip from Walters. Mickelson turned that investment into a nearly $1 million profit, which he paid to Walters to cover a gambling debt. Mickelson never was charged with a crime, but the U.S. Securities and Exchange Commission sued him over the ill-gotten gains and he paid back the money, plus interest.

Colin Moynihan and Liz Moyer of The New York Times report that Walters will appeal:

His lawyer, Barry H. Berke, said he would appeal the verdict.

Mr. Walters, one of the most successful professional sports gamblers in the country, was accused in the latest case against him of using nonpublic information from Thomas C. Davis, a board member of Dean Foods of Dallas, to make more than $40 million from 2008 to 2014 by realizing profits and avoiding losses.

The investigation into Mr. Walters’s activities and subsequent trial drew in prominent figures like Carl C. Icahn, the billionaire investor and unpaid adviser to President Trump, and Phil Mickelson, the champion professional golfer.

The conviction of Mr. Walters lifted something of a cloud that had hung over the United States attorney’s office in Manhattan since December 2014, when a federal appeals court threw out the insider trading convictions of two hedge fund managers. That ruling led prosecutors to vacate the convictions and guilty pleas of several other people.

The verdict against Mr. Walters was also a coda to a series of insider trading prosecutions led by Preet Bharara, the former United States attorney in Manhattan who was fired days before the trial began.

The jurors in Mr. Walters’s case reached their decision after deliberating for a little more than half a day, rendering a swift decision in a trial that lasted 14 days spread over four weeks.

Patricia Hurtado of Bloomberg News reported that Walters’ defense was that he was an astute investor:

Walters didn’t need inside information to profit on the stock market, his lawyers suggested with the witnesses they called to testify.

Walters’ brokers said the gambler was an astute investor who did assiduous research before placing a bet on a company — sometimes as much as $50 million in one shot. Alan Duncan, one of the brokers, said he considered Walters “the Babe Ruth of Risk.” Another, Rob Miller, said Walters got most of his trading ideas from Icahn.

Icahn wasn’t accused of any wrongdoing.

Walters has beaten the odds before. Born in Kentucky, the son of a professional gambler and a teenage mother, Walters began shooting pool — nine ball — at age 4, and by 10, he had progressed to gambling. Decades ago, he was acquitted of state gambling charges after a trial and won dismissal of state indictments accusing him of conspiracy and money laundering, according to court papers filed in a 2014 lawsuit in Las Vegas.

The trial offered jurors a glimpse of a rarefied world where corporate executives mixed with professional athletes on some of the country’s top golf courses. Walters was friends with Icahn and Mickelson, as well as Davis.

Prosecutors said Walters shared one “sure winner” tip he got from Davis with Mickelson, allowing the golfer to make about $931,000 when Dean Foods announced a lucrative spinoff of a unit that caused the stock price to surge. Mickelson used the money to repay a gambling debt to Walters, transferring $1.95 million, according to records shown to jurors.

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