NEW YORK (AP) — Phil Mickelson has agreed to forfeit nearly $1 million that authorities say was unfairly earned on a stock tip from a professional gambler, part of an insider trading probe that resulted in two arrests but spared the wealthy pro golf star from facing criminal charges.
The Securities and Exchange Commission and U.S. Attorney Preet Bharara announced an indictment Thursday against the gambler, William Walters, and a former corporate board member of Dean Foods Co., Thomas Davis, alleging that the pair used non-public information about the company to make tens of millions of dollars in illicit stock trades between 2008 and 2012.
In 2012, the SEC says, Walters called Mickelson, who owed him money, and urged him to trade stock of the Dallas-based distributor of Land O Lakes butter and other dairy products. The SEC says Mickelson made the trade the next day and reaped a profit of $931,000 that he used to help pay off the debt.
“Simply put, Mickelson made money that wasn’t his to make,” Andrew Ceresney, head of the SEC’s Enforcement Division, said at a Manhattan news conference.
Mickelson was named as a “relief defendant” in the case, meaning he was only accused of profiting from the crimes of others and not forced to admit any wrongdoing. Ceresney declined to spell out the rationale for not making him part of the criminal case, other than, “We bring charges based on the evidence and the law.”
The case comes in the wake of a 2014 appeals court decision that made prosecuting people benefiting from inside tips more difficult. The ruling found that in order to be charged, there must be evidence a defendant had first-hand knowledge about the origins of the inside information.
Mickelson’s management group issued a statement Thursday saying that he felt “vindicated” because prosecutors hadn’t charged him with breaking securities laws. It added: “He takes full responsibility for the decisions and associations that led him to becoming part of this investigation.”
Davis, 67, who resigned from Dean Foods’ board of directors last year, has already pleaded guilty in the case and is cooperating with the investigation, Bharara said at the news conference. Walters, 69, was arrested by the FBI in Las Vegas on Wednesday. He was scheduled for arraignment Thursday afternoon in U.S. District Court in Las Vegas.
In a statement, defense attorney Barry Burke called Walters – a multimillionaire who owns several golf courses and auto dealerships – “an American success story.” The accusations, he added, “are based on erroneous assumptions, speculative theories and false finger-pointing.”
Davis’ attorney, Christopher Clark, confirmed his client was cooperating, but declined further comment.
From 2008 through 2012, the SEC said, Davis passed Walters highly confidential information on Dean Foods, including sneak previews of at least six of the company’s quarterly earnings announcements and advance notice of the spin-off of its profitable subsidiary, WhiteWave Foods Co.
In 2013, Davis also gave Walters inside information he’d gotten from a group of investors who confidentially shared their plans to buy stock in Darden Restaurants Inc., the SEC said. Based on the tips, Walters reaped illegal trading profits and avoided losses of at least $40 million, according to the regulators.
Prosecutors allege Walters gave Davis a prepaid cellular phone to use when passing tips, with instructions to use code words, like “Dallas Cowboys” to refer to Dean Foods, prosecutors said.
In May 2014, Mickelson confirmed that FBI agents investigating insider trading questioned him as he finished playing a round at the Memorial Tournament in Dublin, Ohio, and said he was cooperating with the investigation.
Mickelson, 45, was inducted into the World Golf Hall of Fame in 2011. He has won 42 tour events, including five majors – three Masters, one PGA Championship and one British Open. Forbes put his earnings last year at $51 million.
He has long had a reputation for being a gambler, though he has said he scaled back his habit after his son, Evan, was born in 2003. The most publicized payoff was when Mickelson and friends won $560,000 on a preseason bet (28-1 odds) that the Baltimore Ravens would win the 2001 Super Bowl.
He also has a history of playing money games during the practice rounds. He occasionally gets a group of players and caddies together for dinner and small wagering during the NBA and NHL playoffs, and prominent fights.
In their statement, Mickelson’s management representatives said he wasn’t losing any endorsement deals over the inside trading episode.
“Phil understands and deeply respects the high professional and ethical standards that the companies he represents expect of their employees, associates and of Phil himself,” they said. “He subscribes to the same values and regrets any appearance that, on this occasion, he fell short. ”
Associated Press writer Ken Ritter contributed from Las Vegas. Gordon reported from Washington.