SEC: Phil Mickelson made almost $1M on insider trade, not criminally charged

May 24, 2016, 2:38 PM

— -- The Securities and Exchange Commission on Thursday alleged that golfer Phil Mickelson made $931,000 after purchasing stock on an insider trading tip from sports gambler Billy Walters and then used some of the money to pay back Walters, to whom he allegedly owed money.

The SEC on Thursday said Mickelson, who was not criminally charged, has agreed to pay back "all ill-gotten gains," which, including interest, totals $1.03 million.

Mickelson instead was charged as a relief defendant, which is reserved for a person who profited without evidence of knowledge concerning the origin of the illegal tip.

"Simply put, the money Mr. Mickelson made was not his to make," said Andrew Ceresney, director of the SEC's enforcement division.

A spokesman for Mickelson issued a statement Thursday, saying the golfer has "no desire to benefit from any transaction that the SEC sees as questionable."

"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," the statement said. "He subscribes to the same values and regrets any appearance that, on this occasion, he fell short. He takes full responsibility for the decisions and associations that led him to becoming part of this investigation.

"... He is pleased that this matter is over, and he will have no further comment."

PGA Tour spokesman Ty Votaw, when asked if any disciplinary action was being considered against Mickelson, declined comment, citing tour policy.

A spokesman for Barclays, the bank that sponsors Mickelson, declined to comment on how Thursday's actions will affect his relationship with the company.

Officials with financial services company KPMG, which also sponsors Mickelson, said in a statement: "KPMG has had a long and meaningful relationship with Phil Mickelson. While we are disappointed by what the SEC announced today, we appreciate that Phil's statement makes clear he respects and shares the values of KPMG. We accept his statement of personal responsibility and commitment and have nothing further to add."

In its case, the SEC said Mickelson spoke with Walters, with whom he had placed bets, in 2012 about an upcoming spin-off of dairy company Dean Foods. Based on a tip Walters had received, the SEC alleged, Walters told Mickelson to buy the stock. Months after buying 240,000 shares, according to a companion criminal case, Mickelson then repaid Walters using the Dean Foods money, the SEC alleged.

Walters was charged with insider trading and was arrested by the FBI late Wednesday in Las Vegas. He was released from custody Thursday afternoon in U.S. District Court in Las Vegas on $1 million bond and $100,000 cash security. Walters is scheduled to make an appearance before the United States District Court for the Southern District of New York on June 1.

In a separate indictment Thursday, the U.S. Attorney's office in Manhattan, in conjunction with the SEC and the FBI, alleged that Walters' interaction with former chairman of Dean Foods Thomas Davis allowed him to make a profit of $32 million in stock trading while avoiding losses of $11 million.

Davis, who had business relationships with Walters, allegedly received $1.1 million in loans from Walters that went unpaid. Davis is cooperating with the investigation, and he has already pleaded guilty to charges that, in addition to those handed down to Walters, include perjury and obstruction of justice, U.S. Attorney Preet Bharara said Thursday at a news conference in New York.

Authorities were tipped off when, they say, Walters made $17.1 million in 2012 by trading on information that Dean Foods would spin off a company called WhiteWave-Alpro. Through their investigation, the authorities revealed that Davis would frequently call Walters after he allegedly received inside information about the company and Walters would then execute trades.

The SEC also is looking to recoup gains from Davis and Walters.

Walters, 69, is widely considered the most successful sports bettor ever in the U.S. He grew up poor in Kentucky and moved to Las Vegas in 1980. He's parlayed his success betting on sports into the business world. He owns The Walters Group and Nature Development B.V., which counts numerous car dealerships and high-end golf courses as assets.

"Bill Walters is a true American success story, whose extraordinary accomplishments as a lawful sports gambler have been widely recognized and lauded," Walters attorney Barry Berke said in a statement provided to ESPN. "Mr. Walters' renowned work ethic and many other talents also have helped him achieve great success in business, investing and philanthropy. Mr. Walters and his counsel look forward to his day in court where it will be shown that the prosecutors' accusations are based on erroneous assumptions, speculative theories and false finger-pointing."

A spokesman for Dean Foods, based in Dallas, said Thursday that Davis resigned from the company's board of directors last year and is no longer affiliated with the company. Dean Foods said it is cooperating with the government investigation.

According to indictments, when the Walters and Davis would discuss Dean Foods, they would refer to the company as the "Dallas Cowboys."

Mickelson is also tied to a federal money laundering case, sources told ESPN last year, in which a California man is accused of transferring almost $3 million as part of an illegal gambling operation. The nearly $3 million is alleged to be Mickelson's money.

Gregory Silveira of La Quinta pleaded guilty in June to three counts of laundering funds. He had filed a motion in March to withdraw his plea, which was considered and ultimately denied by the court. He awaits sentencing.

Mickelson has not been charged with a crime and is not under federal investigation in the laundering case.

The 45-year-old Mickelson 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.

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 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.

The Associated Press contributed to this report.