Las Vegas Sun

March 28, 2024

Billionaire investor Carl Icahn dragged into Las Vegas gambler’s insider trading trial

Carl Ichan

Karsten Moran for The New York Times

Billionaire investor Carl Icahn, center, sits for a photo portrait after speaking at a Dealbook Conference at the Whitney Museum of American Art in New York, Nov. 3, 2015. Icahn, an unpaid advisor to President Trump, has been pulled into a high-profile insider trading trial of Las Vegas sports gambling kingpin William Walters.

Updated Tuesday, March 28, 2017 | 4:29 p.m.

Carl Icahn, a billionaire investor and an unpaid adviser to President Donald Trump, has been pulled into a high-profile insider trading trial taking place in federal court in Manhattan.

The Las Vegas sports gambling kingpin William T. Walters is charged with using nonpublic information while trading shares of Dean Foods, one of the country’s largest dairy processors. The case has already brought down the former chairman of Dean Foods and drawn in the professional golfer Phil Mickelson.

Now prosecutors are pressing the judge to permit new evidence of potentially improper trading in shares of Clorox by Walters. The prosecutors allege that Walters could have made profitable trades in Clorox stock in 2011 based on tips he might have received from Icahn, his friend.

Walters is on trial in federal court in one of the biggest criminal insider trading cases in years. He has been charged with pocketing profits and avoiding losses of more than $40 million in shares of Dean Foods. He stands accused of securing inside information from Thomas C. Davis, then the chairman of Dean Foods, who is now a key cooperating witness in the case.

Walters, known as Billy, has denied any wrongdoing. He has faced charges on four other occasions that were mainly related to his sports gambling business, but he has never been convicted.

Icahn, 81, has not been charged with any wrongdoing in the case, and prosecutors are seeking to admit the additional evidence solely to strengthen their case against Walters and undermine his defense.

But Icahn’s involvement in the trial — if by name only — has added additional drama to the proceedings.

The move by prosecutors to introduce the additional trading information comes as Icahn has attracted scrutiny for his role as an adviser on regulatory matters for Trump. Even though he is not registered as a government employee, Icahn has met with Trump administration appointees and discussed regulatory issues that some Democratic senators have warned could benefit his own portfolio.

A cantankerous and outspoken investor, Icahn has long made headlines for his investing style, one that involves aggressively attacking the chiefs of some of the biggest companies in the United States.

In a filing to Judge P. Kevin Castel on Friday, federal prosecutors said Walters had opened the door to new evidence when his lawyer, Barry Berke, told jurors that it was not uncommon for Walters to make “big bets” of “tens of millions of dollars at a time.”

Prosecutors pointed to Walters’ trading in Clorox shares in 2011, which had been previously reported. Federal authorities had also sought to introduce evidence of trading by Walters in shares of Apple in the summer and fall of 2013, which had not been previously reported, but they backed away from that during the hearing on Monday afternoon before Castel.

Castel considered arguments from both sides as he deliberated whether or not to allow the jury to learn about the Clorox trades.

“Tell me what you have here,” the judge said. “What are you going to show that it is more than smoke?”

The prosecutors argued that introducing the Clorox trades would demonstrate a pattern of suspect trading by Walters.

“We would like the jury to know that getting this sort of an edge, he has done it in other stocks as well,” said Michael Ferrara, one of the prosecutors. “We’d like to say there’s some other suspicious trading as well.”

Castel did not rule on the matter on Monday.

Over the weekend, Berke filed a response saying the government’s assertion was “pure speculation” and adding that prosecutors were seeking “to have the jury draw legal conclusions that are simply wrong.”

With regard to Walters’ trading in Apple stock, Berke said the government was trying to implicate his client by revealing that he had spoken to Icahn “shortly before Mr. Icahn tweeted about his investment in Apple stock in August 2013.”

Berke denied that there had been any such conversation, adding that even if the two had spoken ahead of Icahn’s announcement, “there is no basis to suggest that would violate securities laws.”

Insider trading violations often turn on whether the person passing on a tip has breached a fiduciary duty. In the case of Icahn, it is not clear whether he breached any such duty.

Jonathan Streeter, a lawyer for Icahn and a partner at Dechert, said in an email that Icahn “has never done anything improper with respect to Clorox, Apple or any other stock.”

This is not the first time that Icahn has been mentioned in this case.

During jury selection, Icahn’s name was on a list of people who could come up during the trial as a witness or in being discussed during testimony.

Icahn, who is not expected to testify, also came up briefly last week during direct testimony from Davis, who has pleaded guilty to supplying stock tips to Walters and agreed to cooperate with prosecutors.

A prosecutor asked Davis during his testimony whether Walters had ever made stock recommendations to him. Davis said that on one occasion, Walters had suggested a stock that Icahn “had taken a position in,” telling him, “You should think about buying it.”

Davis added that Walters had said that Icahn was “very enthusiastic” about the stock, which was not named. Davis said he understood from Walters that he had a familiar relationship with Icahn, whom he referred to as “my friend in New York.”