Yesterday, July 27, 2017, Billy Waters was sentenced to five (5) years in prison and a ten (10) million dollar fine. The sentencing is for his April convictions for wire fraud, conspiracy, and securities fraud. Walters profited more than $43 million dollars by making trades of Dean Foods, based off of insider information he received from the company’s former chairman, Tom Davis. The sentencing judge called Waters a criminal and a cheat, and even added that he was "not a clever one."
Popular golf pro Phil Mickelson barely missed the bullet on this one. He allegedly profited at least $931,000 by using the insider information that Walters provided him. He made a deal where he paid back his profits of $931,738 plus over $100,000 in interest. He did not have to make any confessions or agree that he broke the law. Phil Mickelson’s defense, which saved him in part, was that he didn’t realize where the information was coming from and therefore it wasn’t insider trading as he supposedly was just listening to the advice from Masters, without realizing that Master’s was getting the info illegally. He didn’t even have to testify at the trial as he told both the prosecuting attorneys as well as the defense lawyers, that he would plea the 5th Amendment if he was called to testify. That was likely an incredibly wise move, and one that I regularly advise my clients to do when they are facing potential criminal charges.
However, Phil Mickleson was extremely lucky to not faces charges as there was evidence against him. For example, he had a long history with Billy Masters in the gambling world. He even owed Masters major money. In fact, when he sold his stock that Masters advised, he used all the profits to pay Master back for a debt he owed him from gambling losses. Apparently, Mickelson was significantly indebted to Masters and this led to interesting actions by Mickelson regarding his stock purchasing and selling of Dean Foods. This same kind of indebtedness is what led to the initial insider trading using the information former chairman Tom Davis gave to Masters. During trial, Tom Davis testified that he gave the information to Masters because he was indebted to him. Sounds familiar. Sounds like the kind of leverage a prominent Vegas gambler and hustler would use against both a former chairman and a golf pro.
Masters was indeed a prominent gambler throughout Vegas. Back in the 80’ he started a gambling business utilizing computers which analyzed flaws in betting numbers. This led to his business making major bets, and often winning, to the point where many of the casinos either limited their betting capabilities out simply refused to take bets from them and even banned them from their casinos. Masters continued to be active in the gambling world and won some huge bets, while losing some as well. In the end though, his gambling with white collar crime cost him big.
You are probably asking yourself why wasn’t Mickelson charged and prosecuted? That is an interesting legal question. It is due to two different cases. One case (the Newman case) stated that you couldn’t pursue charges without evidence that the accused Defendant knew specifically about the insider trading specifics. However, that case was later overturned by a different case that the United States Supreme Court ruled on. The SCOTUS ruled unanimously that prosecutions can indeed proceed in cases like this. However, because Mickelson’s case fell in that brief time period where the law protected cases like that, he barely dodged the charge and likely trial. You know he and his criminal defense attorney were carefully navigating their way through that landmine of potential white collar crime charges.