Phil Mickelson to return profits from Dean Foods insider trading scheme

Professional golfer Phil Mickelson has agreed to forfeit nearly $1 million that the Securities and Exchange Commission said was unfairly earned on a tip from an insider trading scheme conducted by a former corporate director and a professional gambler.

Federal prosecutors announced criminal charges Thursday against a gambler named William Walters and a former chairman of Dallas-based Dean Foods, Thomas Davis, alleging that the pair used inside information about the company to make 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 Dean Foods stock. The SEC says Mickelson did so the next day and made a profit of $931,000.

“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.

The golfer was not charged criminally in the case. As a relief defendant, Mickelson hasn’t been accused of participating in the insider trading, but only of profiting from the scheme.

Mickelson’s management group issued a statement Thursday saying that he felt “vindicated” because prosecutors hadn’t charged him with violating securities law.

“At the same time, however, Phil has no desire to benefit from any transaction that the SEC sees as questionable,” it said. Accordingly, he has entered into an agreement with the SEC under which he will return all the money he made on that 2012 investment.

Davis has already pleaded guilty in the case and is cooperating with the investigation, the U.S. Attorney in Manhattan, Preet Bharara announced Thursday. Walters 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.

Davis’ attorney, Christopher Clark, confirmed that his client was cooperating, but declined to comment further. There was no immediate response to a message left with a lawyer for Walters.

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 spinoff of its profitable subsidiary, WhiteWave Foods Co.

Federal prosecutors say Davis and Walters communicated with prepaid cellphones and used code words to hide their crimes. In a conspiracy played out over six years, Walters told Davis to use “Dallas Cowboys” to refer to Dean Foods on the phone he was given, they say.

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, the SEC said.

Based on the tips, Walters reaped illegal trading profits and avoided losses of at least $40 million, according to the regulators.

This story was originally published May 19, 2016 at 11:42 AM with the headline "Phil Mickelson to return profits from Dean Foods insider trading scheme."