Gambling Debt, Stock Tip Leads to $ 1 Million Settlement But Mickelson No Charges

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NEW YORK (Reuters) – At the end of July 2012, Phil Mickelson, one of the world’s most famous golfers, received a phone call from a well-known professional sports player, William “Billy” Walters.

At the time, according to US officials, Mickelson owed a gambling debt to Walters, and Walters had good stock advice: buy shares in the food company Dean Foods Co.

Four days later, Mickelson owned $ 2.4 million in Dean Foods shares, according to the United States Securities and Exchange Commission. A few weeks later, he made a profit of $ 931,000 when the company announced a spin-off that sent its share price higher. Mickelson then paid off his debt to Walters.

On Thursday, U.S. officials said Mickelson had agreed to donate more than $ 1 million in profits and interest in an insider trading case against Walters and the former CEO of Dean Foods, Thomas Davis.

“Put simply, Mickelson made money that wasn’t his,” SEC chief law enforcement chief Andrew Ceresney said at a press conference in New York.

Mickelson, 45, was named a “backup defendant” in the SEC civil lawsuit, a term for someone who is not accused of wrongdoing but who has received ill-gotten gains as a result of illegal acts of others.

His lawyers said Mickelson was “an innocent bystander” who “feels justified” in not being charged. One of the lawyers also said that Mickelson takes responsibility “for the decisions and associations that led him to be part of this investigation.”

It is not clear whether Mickelson benefited from a 2014 appeals court ruling that limited the ability of authorities to bring insider trading charges against people who obtain second-hand or third-party privileged information. third hand, rather than directly from a company insider.

Gregory Morvillo, a New York attorney who handles insider trading cases, said it was possible the ruling would have a “chilling effect” on the SEC’s authority to lay charges against Mickelson.

Andrew Ceresney, SEC Enforcement Director, speaks at a press conference on transactions related to golfer Phil Michelson, Las Vegas sports bettor William “Billy” Walters and former Dean Food President Thomas Davis, both charged with insider trading, in New York, United States, May 19, 2016. REUTERS / Brendan McDermid

It remains to be seen whether the allegations will impact Mickelson’s reputation. His lawyer said the golfer appreciated that his corporate sponsors decided to continue their deals with him.

THE SPONSOR IS “DISAPPOINTED”

Several sponsors, including golf club maker Callaway, did not respond to requests for comment.

But accounting firm KPMG said, “While we are disappointed with what the SEC announced today, we appreciate that Phil’s statement makes it clear that he respects and shares KPMG’s values. We accept his statement of personal responsibility and commitment and have nothing more to add.

Amgen, who uses Mickelson to market their bestselling arthritis drug Enbrel, said in a statement: “While we cannot comment on the SEC matter involving Phil Mickelson, we have been working with Phil for many years and he is. a passionate patient advocate. with psoriatic arthritis.

Mickelson, who is ranked 17th on the PGA Tour this year, was known for years as “the best player to ever win a major tournament.” But he lost that tag with a 2004 Masters victory. He has since won two more Masters titles and two other majors.

Nicknamed “Lefty” and “Phil the Thrill”, Mickelson is one of golf’s greatest attractions and pleasures to interact with fans along the course. Although he is capable of boosting television ratings, Mickelson is also admired for being a committed family man and generous donor to charity.

The Professional Golfers Association website said Mickelson had career earnings of over $ 79 million on the tour, just behind Tiger Woods’ $ 110 million. In 2015, Forbes magazine estimated that Mickelson was making more than $ 40 million a year from appearances and sponsorship deals, which also include Barclays PLC, Exxon Mobil Corp and Rolex.

The SEC said Mickelson placed bets with Walters before and after July 2012, when the player called Mickelson with his Dean Foods tip.

Walters and Davis, the former CEO of Dean Foods, have embarked on a multi-year program to trade the food company’s shares ahead of big company announcements, according to federal officials. Davis has already pleaded guilty.

Mickelson’s $ 2.4 million position in Dean Foods using three brokerage accounts eclipsed his other investment holdings in those accounts, which together amounted to less than $ 250,000, the SEC said. .

The Dean Foods case was brought by Preet Bharara, the American attorney in Manhattan, who racked up a near-perfect track record in dozens of insider trading cases before the 2014 appeals court ruling. limits the scope of insider trading laws.

At a press conference, Bharara declined to comment on the effect of the ruling on the Dean Foods case, but acknowledged that it had an impact on his ability to pursue some “nefarious behavior”.

Additional reports by Nate Raymond and Mark Lamport-Stokes; Editing by Dan Grebler and Bill Trott



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