Former Dean Foods chairman, gambler charged for insider trading

20-May-2016 - USA

Federal prosecutors Thursday charged former Chairman of Dean Foods Thomas Davis, and a sports gambler William Walters for alleged criminal insider trading. 

Golfer Phil Mickelson was also charged in the SEC's civil case as a relief defendant - a person who has received property or benefits linked to illegal activity. 

Davis, a former investment banker, has allegedly shared boardroom secrets of the dairy giant to Walters in favor of the financial aid he received from Walters, the authorities said. These illegal stock tips from Davis helped Walters generate some $43 million in profits and avoided losses. 

The authorities filed parallel criminal and civil insider trading cases in Manhattan federal court. 

Davis has agreed to plead guilty. Walters was arrested at a resort in Las Vegas late Wednesday charged with criminal conspiracy, securities fraud, and wire fraud. 

Davis had retired from investment banking at Credit Suisse First Boston in 2001. His troubled finances made him borrow money from Walters to meet his mounting debts, including $100,000 he had wrongfully taken from a Dallas-based charity he managed. Davis, the chairman of Dean Foods then, returned the favor by feeding secrets. 

In a five-year conspiracy, from at least 2008 to 2014, Davis allegedly tipped Walters sneak previews of at least six of Dean Foods' quarterly earnings announcements in addition to the leak about the WhiteWave spinoff. 

Information about Darden Restaurants, the parent of Olive Garden and other popular dining chains, was also passed. The court filings show that Davis got the Darden information from a law firm that had tried to recruit him to invest in Darden. 

The two men allegedly used disposable cellphones and even created a secret code for discussing Dean Foods. 

Walters used these information to execute trades of Dean Food shares that generated approximately $32 million in profits and roughly $11 million in avoided losses. Walters also allegedly executed trades in shares of Darden stock that produced approximately $1 million in profits. 

The SEC complaint alleges that Walters passed some of these information to Mickelson, who had also borrowed money from him.

Mickelson has made $931,000 in profits on winning trades of Dean Foods shares. 

Following the charges, Mickelson has agreed to pay more than $1 million from the combined Dean Foods trading profits and prejudgement interest. (dpa)

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