Thursday, March 16, 2017 | 10:17 a.m.
NEW YORK — A high-rolling Las Vegas sports gambler, William T. Walters, is on trial in Lower Manhattan on insider trading charges. But for many in the sports world, a more pressing question is whether golfer Phil Mickelson will testify.
Mickelson is one of the people who federal authorities say were on the receiving end of a stock tip that prosecutors contend Walters got illegally from a director at Dean Foods.
Mickelson is not charged with any wrongdoing, but he was named as a relief defendant in a suit filed by securities regulators. He agreed to turn over the $1 million in profits he made on the trade.
Mickelson’s name came up Wednesday in the opening statement by federal prosecutors and was listed in a questionnaire given to prospective jurors in U.S. District Court in Manhattan.
On Monday, the judge presiding over the case, P. Kevin Castel, dismissed one person from the jury pool who he said had a “look of rapture” at the mention of Mickelson during the jury selection process.
As for Walters, federal prosecutors contend he realized profits and avoided losses of more than $40 million from inside information he received on Dean Foods. The authorities said that from 2008 through 2014, Walters had an uncanny ability to make well-placed and timely trades, before significant corporate events, in shares of what was then the country’s leading milk processor.
And the source of those tips, prosecutors told the jury Wednesday, was the chairman of Dean Foods at the time, Thomas C. Davis, who has since admitted his participation in the scheme and become a witness for the government.
“Greed, that’s what this case is about,” said a prosecutor, Michael Ferrara. “It’s about this man, William Walters, illegally and unfairly using secret business information to make millions in profits.”
Lawyers for Walters, however, maintained that his buying and selling had nothing to do with insider trading. It resulted instead from the acuity that he had honed over the years while building a reputation as the most successful sports bettor in the country.
“Mr. Walters took the same skills that had made him so successful with sports betting and gambling and applied them to investing,” one of his lawyers, Barry H. Berke, told the jury, adding that Walters had often relied, in gambling and investing, on “tells,” or “little clues that are not obvious.”
Walters faces conspiracy and fraud charges stemming from the Dean Foods trades.
This is the fifth time that Walters has tangled with law enforcement authorities. He has previously faced charges that were mainly related to his sports gambling business but has never been convicted.
The trial is the most prominent criminal insider trading case in Manhattan since the trial of Rajat Gupta, the former McKinsey managing director and Goldman Sachs director, convicted of tipping off billionaire hedge fund manager Raj Rajaratnam.
Ferrara said that prosecutors would make their case with witnesses, including Davis, from phone records showing conversations between Davis and Walters and from trading records showing that Walters had often bought or sold Dean Foods stock after such calls.
“He was a cheater trying to look like a genius,” Ferrara said. “He was the kid who aces the test because someone gives him the answers beforehand.”
The two men went to some lengths to try to disguise their communications, he added, using a code term, Dallas Cowboys, to refer to Dean Foods. They also conducted some conversations over prepaid cellphones, including one they called the Bat Phone, which Davis at one point tried to destroy, throwing it into a creek.
Berke countered that Davis, whom he described as “a Harvard-trained investment banker with a taste for cars” had “a dark side” and had resorted to embezzlement to try to extricate himself from debts.
As his situation grew more dire, Berke said, Davis falsely implicated Walters. At one point he beamed onto a screen selections from sworn testimony that Davis had given in 2015 to agents for the Security and Exchange Commission in which he denied ever providing insider information to Walters.
“We’re going to unravel every single lie Tom Davis is going to tell here,” he said. “You’re going to see it, you’re going to feel it, you’re going to know.”
