Golf superstar Phil Mickelson will have to repay nearly $1 million he made trading on an insider tip from a professional gambler but isn’t being charged with wrongdoing by either securities regulators or Manhattan U.S. Attorney Preet Bharara, officials said Thursday.
According to a Securities and Exchange Commission complaint in Manhattan federal court, Las Vegas sports gambler William “Billy” Walters got tips from Dean Foods Corp. board member Thomas Davis, and then had Mickelson repay gambling debts from $931,000 he made in a week trading on a tip in 2012.
Walters, arrested Wednesday in Las Vegas, faces criminal charges that he made profits and avoided losses of $40 million on Dean Foods tips from 2006 to 2014. Davis, who got $1 million from Walters, pleaded guilty this week. Mickelson is repaying the profit from his trading, but faces no charges.
Bharara, at a joint news conference with the SEC, portrayed Walters as the central figure in the scheme, providing Davis with a prepaid cellphone and using the code “Dallas Cowboys” to discuss tips about earnings and a spinoff at Dean, the Texas-based Fortune 500 distributor of familiar products like Land O’ Lakes butter.
“These bets were no gamble at all,” Bharara said. “They were a sure thing. He had tomorrow’s headlines today.”
But Bharara and SEC enforcement director Andrew Ceresney both declined to explain the lack of charges against Mickelson, 45, who was not even mentioned in the criminal complaints against Davis and Walters, and was identified as a “relief defendant” who owed money but didn’t engage in wrongdoing.
“We bring charges based on the evidence and the law, and what we can justify based on the evidence and the law,” Ceresney said in response to questions about whether letting a celebrity athlete off with no penalty sent a bad message.
A 2014 2nd U.S. Circuit Court of Appeals ruling on insider trading said a secondhand recipient of a tip had to know about benefits received by the corporate insider to be prosecuted, making cases against third parties like Mickelson harder.
Bharara, who has criticized that ruling, would not say if it affected the decision not to prosecute Mickelson, but said it did allow some “nefarious conduct” to go unpunished.
Mickelson, 45, of Rancho Santa Fe, California, had never before held Dean stock when he got a tip in July, 2012, from Walters, and invested $2.4 million partly on margin just eight days before the stock price vaulted 40 percent, the SEC said.
Mickelson lawyer Greg Craig, in a statement, did not describe what Mickelson had been betting on with Walters or what he owed, but said the outcome of the two-year-long investigation into his trades “vindicated” his client because the SEC didn’t charge securities violations.
Craig also said corporate clients were sticking by Mickelson, a successful product pitchman, and he “regrets any appearance that, on this occasion, he fell short” of his clients’ ethical standards.
Barry Berke, a lawyer for Walters, 69, a well-known sports gambling figure, called the charges a product of “erroneous assumptions, speculative theories and false finger pointing.”