Gambler Walters Loses in DOJ Insider Trading Trial

William “Billy” Walters rolled the dice against the Manhattan U.S. Attorney’s Office and lost in a high profile insider trading case. U.S. v. Davis, No. 1:16-cr-00338 (S.D.N.Y. Verdict April 7, 2017). Mr. Walters, a well known Las Vegas gambler, was found guilty by a New York jury on two counts of conspiracy, four counts of securities fraud and four counts of wire fraud. The SEC’s parallel case is pending. SEC v. Walters, Civil Action No. 1:16-cv-03722 (S.D.N.Y. Filed May 19, 2016).

Charged in the action were Mr. Walters, and Thomas C. Davis. Mr. Walters is the Chairman and CEO of The Walters Group. He is a professional sports bettor. Mr. Davis was a director of Dean Foods Company and a member of the audit committee. He was also a member of a group of shareholders of Darden Restaurants, Inc. trying to institute change at the company. Mr. Davis pleaded guilty and has been cooperating with the government.

From 2008 through 2012 Mr. Davis repeatedly tipped his friend William Walters in advance of certain corporate events related to Dean Foods, according to facts alleged by the SEC. The tips, for example, came in advance of six quarterly earnings announcements. Mr. Davis also tipped his friend in advance of the spin-off of a profitable Dean Foods subsidiary, The WhiteWave Foods Company. In addition, the director provided Mr. Walter, in 2013, with information he obtained on a confidential basis from a group of investors seeking to institute corporate change at Darden.

As he was tipped Mr. Walters traded profitably. In some instances those trades were placed through one of two entities. One was the Walters Group, a partnership of Mr. Walters and his wife. The other was Nature Development B.V., and off-shore company indirectly controlled by Mr. Walters. Overall the trading netted him at least $40 million in profits. In exchange for the inside information Mr. Walters aided Mr. Davis with his financial difficulties, furnishing him with almost $1 million.

The SEC complaint added professional golfer Philip Mickelson as a relief defendant. The Commission claimed that Mr. Walters tipped the golfer in July 2012 about the Dean Foods spin-off. At the time Mr. Mickelson owed Mr. Walters money from gambling. Mr. Mickelson traded, reaping profits of about $931,000. The SEC did not claim that Mr. Mickelson knew the information furnished to him came from a breach of a duty for a personal benefit. Rather, Mr. Mickelson is named by the SEC only as a relief defendant, along with the Walters Group and Nature Development B.V.

Sentencing for Mr. Walters is scheduled for July 14, 2017.

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