The recent insider trading case against William “Billy” Walters of Las Vegas is fascinating for all of the players involved, including him. Plenty has been written about the charges because it implicates pro golfer Phil Mickelson and former Dean Foods board member Thomas C. Davis. All three are implicated in insider trading. How did they get caught?
It looks like the getting caught was relatively straight forward. Walters made big, obvious trades around earnings releases and major news for Dean Foods and Darden Restaurants. In June 2008, Walters bought more than 4 million shares, which represented between 29 and 37% of the daily trading volume in the company during his two day buying spree. In April 2010 Walters bought 19% to 21% of the trading volume during his short buying spree.
The SEC linked Walters to Davis. Since Davis was on the board of Dean Foods and Darden Restaurants he was the obvious source of information. According to The Wall Street Journal, Davis is cooperating with the government.
The case also implicated pro golfer Phil Mickelson. Mickelson made some big, obvious trades that would have attracted the attention of a compliance review. He bought a $2.4 million position in Dean Foods, while the rest of this trading account only had $250,000 in assets. He was not a frequent trader and had not bought Dean Foods before.
That they got caught is no surprise. Most trade monitoring programs would flag that activity.
What is a surprise is that Walters made such obvious bets on the market when he is well know for hiding his gambling bets. A story in ESPN tells all the steps he takes to hide his positions in sport betting. He uses runners to make bets so it does not look like his bets. He buys on the opposite side of a bet to better the spread. The story tells of other steps he takes to conceal his positions. According to the SEC, he failed to do so in his securities trades.
Sources:
- SEC Announces Insider Trading Charges in Case Involving Sports Gambler and Board Member
- SEC complaint
- Billy Walters – A Legend In Sports Betting History
- A Life on the Line by Mike Fish in ESPN
- U.S. Attorney charges former Dean Foods chairman and gambler with insider trading by Francine McKenna in MarketWatch
- Why it was easy for investigators to find the Dean Foods insider trades by Francine McKenna in MarketWatch
- Phil Mickelson is very glad United States v. Newman is the law in the Second Circuit by David Smyth in Cady Bar the Door
Roulette by Chris Yiu CC BY SA
