Companies and Brands

Inside Traders Charged at Dean Foods, Golfer Phil Mickelson Named in Report

Chris Lange

Published: May 19, 2016 12:55 pm

Last Updated: January 13, 2020 7:49 am

The U.S. Securities and Exchange Commission (SEC) has just announced insider trading charges against a professional sports gambler who allegedly made $40 million based on illegal stock tips from a corporate insider who owed him money. The agency alleged that the sports gambler, William Walters of Las Vegas, was owed money by then-Dean Foods Co. (NYSE: DF) board member Thomas C. Davis.

According to the SEC, 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 alleged 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.

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.

After certain suspicious trades had been identified, the SEC’s 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.

Separately, the SEC complaint also alleged that professional golfer Phil Mickelson traded Dean Foods’s securities at Walters’s urging and then used his almost $1 million of trading profits to help repay his own gambling debt to Walters. Walters and Davis are charged in the complaint with insider trading, and Mickelson is named as a relief defendant.

Relief defendants are not accused of wrongdoing but are named in SEC complaints for the purposes of recovering alleged ill-gotten gains in their possession from schemes perpetrated by others.

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.

Andrew Ceresney, director of the SEC’s Enforcement Division, commented:

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. Additionally, Mickelson will repay the money he made from his trading in Dean Foods because he should not be allowed to profit from Walters’s illegal conduct.

In a parallel action, the U.S. Attorney’s Office announced criminal charges against Walters and Davis.

Shares of Dean Foods were trading at $17.70 on Thursday, with a consensus analyst price target of $20.60 and a 52-week trading range of $14.56 to $21.17.