Former Dean Foods chairman Thomas Davis was unexpectedly sentenced to two years in prison Thursday despite serving as a key government witness in the insider trading trial of Las Vegas gambler Billy Walters as a Manhattan federal judge called him a liar, cheater and “peacock.”
Prosecutors asked for no jail time, but U.S. District Judge Kevin Castel said Davis went on a Las Vegas gambling trip after pleading guilty despite a large restitution debt, and may have made misleading statements to prosecutors about calls to escort services and paid sex.
“I have questions in my mind about what kind of remorse there is here,” the judge said. “Mr. Davis paraded through Dallas as a peacock, accepting the friendship of other CEOs, being a big shot at his golf club and at his charity when he was a phony, a fraud and a crook.”
The sentence appeared to catch Davis, 68, and his lawyers by surprise. Cooperating witnesses routinely serve no prison time, and prosecutors glowingly praised Davis’ role in convicting Walters of a $45 million insider trading scheme in which he also passed confidential information from Davis about Dean, a Fortune 500 dairy products company, to golfer Phil Mickelson.
In addition to insider trading, Davis pleaded guilty to obstruction of justice for disposing of a burner phone — called the “bat phone” — that he and Walters used to communicate in code and perjury before the Securities and Exchange Commission, and admitted he took money from a golf charity to cover shortfalls from his lifestyle, gambling habit and divorce obligations.
Davis apologized to Castel for his crimes. “I made a series of grave mistakes,” he said. “I’ve been humbled by this process and my life has been forever changed.” But the judge was unpersuaded.
He grilled Davis lawyer Ben Naftalis about whether cell records of multiple calls to escort services contradicted denials of paid sex — “Those phone calls do not prove that he had the sex,” Naftalis said — and about a party trip Davis took to Las Vegas days after his guilty plea last year that exposed him to millions in restitution.
Naftalis said expenses were paid for by friends, Davis lost only $10,000 gambling, and Castel had approved the travel.
“I don’t think I approved a gambling junket,” Castel said. “I’m talking about what it says about genuine remorse. Whether this man was ashamed of his conduct and chastened, or not?”
In addition to two years in prison, Castel said Davis owed $8.8 million in restitution to Dean Foods, and ordered him to surrender on Jan. 9. Davis and Naftalis declined to comment after the sentencing.