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Mickelson to repay $1.4m in proceeds from insider trading scheme

Friday, 20 May 2016 08:59:10

Phil Mickelson at Valhalla Golf Club (Getty Images: Jeff Gross)

Five-time major golf champion Phil Mickelson has been caught up in an insider trading scheme that is alleged to have made him almost $US1 million.

The US Securities and Exchange Commission (SEC) has charged a former chairman of Dean Foods Co and a professional Las Vegas gambler with engaging in the scheme that netted more than $US40 million.

"These bets were no gamble at all," Manhattan US Attorney Preet Bharara said. "They were sure things."

Mickelson has not been criminally charged in the SEC lawsuit, but was named as a relief defendant in a civil case, not accused of wrongdoing but of receiving ill-gotten gains as a result of others' illegal acts.

Mickelson agreed to pay back $US1.03 million ($1.42m), including profit and interest, to resolve claims from his role in the scheme.

The SEC said Mickelson, 45, owed sports gambler William Walters money after placing bets with him.

It said that at that time, Walters, aware of a Dean Foods corporate spin-off, urged Mickelson to trade in the company's stock, enabling the golfer to earn $US931,000 of profit.

"Simply put, Mickelson made money that wasn't his to make," said Andrew Ceresney, the SEC's director of enforcement.

Walters, 69, was arrested in Las Vegas on Tuesday on charges of securities fraud, wire fraud and conspiracy. Walters has long faced various state and federal probes in his career as one of the most successful sports bettors in the United States.

Former Dean Foods chairman Thomas Davis had passed on tips to Walters. Davis, who resigned from Dean Foods' board in August, pleaded guilty on Monday.

Prosecuting Mickelson difficult due to law limitation

The charges marked the most significant insider trading case that the US Attorney's office has pursued since a 2014 appellate ruling limited the scope of the applicable laws, a major setback for a high-profile crackdown that began in 2009.

That ruling limited authorities' ability to pursue charges against a defendant who heard a stock tip second or third-hand that originated with a corporate insider. It made prosecuting someone like Mickelson more difficult.

At a news conference, Bharara declined to say if that ruling was the reason Mickelson was not charged.

But he said the decision "has had an impact on our investigations," allowing some "nefarious conduct" to go unprosecuted.

He called the ruling "wrongly decided," and noted that the US Supreme Court has agreed to review what constitutes insider trading.

Mickelson's lawyer Gregory Craig did not address the ruling in a statement but said the golfer felt "vindicated" the SEC concluded he did not engage in wrongdoing.

"At the same time, however, Phil has no desire to benefit from any transaction that the SEC sees as questionable," Mr Craig said.

Reuters

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