FBI agent’s news leaks may doom federal case against sports bettor

By Michael Corkery, New York Times News Service

Friday, Dec. 23, 2016 | 2 a.m.

A major insider trading case against the Las Vegas sports bettor William T. Walters is in danger of unraveling, after it was revealed that a federal agent leaked confidential information to reporters.

At a hearing in New York on Wednesday, the judge in the case excoriated the agent for his role in the leaks and essentially instructed Walters’ lawyers to file a motion to dismiss the case.

“To say I was shocked would be an accurate statement,” Judge P. Kevin Castel of U.S. District Court in Manhattan said of the leaks.

Walters was charged in May with using illegal stock tips to help generate some $40 million in profits and avoid losses in one of the most prominent insider trading cases brought by Preet Bharara, the U.S. attorney for the Southern District of New York.

A dismissal would represent a significant blow to Bharara’s efforts to revive vigorous insider trading prosecutions two years after an appeals court overturned the convictions of two hedge fund managers and imposed stringent limits on prosecutors.

The case against Walters has been marred by revelations this month that a special agent for the FBI leaked details of the inquiry to reporters at The Wall Street Journal and The New York Times two years before Walters was indicted.

That agent has told federal prosecutors that he was a “significant source of confidential information” for the reporters, who produced articles about the investigation in 2014.

The agent, who has not been publicly identified, faces a criminal investigation by the Justice Department’s Office of Inspector General, prosecutors said.

Walters’ lawyer, Barry Berke, said the agent’s motive in leaking information was to thrust the case into the public eye to help jump-start an investigation that had stalled.

Walters is widely considered to be one of the most successful sports bettors in the country. He has been profiled in magazines and on “60 Minutes.’’

The authorities have said illegal stock tips from Thomas Davis, a former chairman of Dean Foods, helped Walters generate millions in profits while avoiding losses. Davis agreed to plead guilty and cooperate with the investigation.

The investigation was notable in part because it also involved champion golfer Phil Mickelson. Mickelson was not criminally charged, but the Securities and Exchange Commission cited him in a lawsuit against Walters, saying he traded in Dean Foods stock on Walters’ recommendation. Mickelson agreed to repay nearly $1 million in profits.