Phil Mickelson has agreed to forfeit nearly $1 million that the Securities and Exchange Commission (SEC) said was unfairly earned on a tip from an insider trading scheme conducted by a former corporate director and a professional gambler.
Federal prosecutors have announced criminal charges against a gambler named William Walters and the former director of 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 briefing in Manhattan.
The golfer was not charged criminally in the case. As a relief defendant, Mickelson has not been accused of participating in the insider trading, but only of profiting from the scheme
Mickelson’s management group issued a statement saying he felt “vindicated” that the SEC had not 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 co-operating with the investigation, the US Attorney in Manhattan, Preet Bharara said.
Walters was arrested by the FBI in Las Vegas on Wednesday.
From 2008 to 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 spin-off of its profitable subsidiary, WhiteWave Foods.
In 2013, Davis also gave Walters inside information that Davis had got 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.
The SEC said that on August 8th, 2012, Mickelson sold all the Dean Foods shares he had purchased on July 30th and 31st, netting him a profit of around $931,000.
Mickelson was not in the field of the Byron Nelson Classic in Irving, Texas, where play began on Thursday morning.
In their statement, Mickelson’s management representatives said he was not losing any endorsement deals over the episode.
“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,” it 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.”
In May 2014, Mickelson confirmed that FBI agents investigating insider trading questioned him as he finished playing a round at the Memorial Tournament in Dublin, Ohio.
Mickelson would not discuss details about his relationship with Walters, a multi-millionaire who owns several golf courses and car dealerships. He would not talk about stock tips he received, but reiterated that he did nothing wrong.
“And that’s why I’ve been fully co-operating with the FBI agents, and I’m happy to do in the future, too, until this gets resolved,” he said two years ago.
Mickelson, 45, 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.
