WASHINGTON - The Securities and Exchange Commission has sued professional golfer Phil Mickelson, saying he profited from an insider trading scheme conducted by a former corporate director and a professional gambler.
The SEC also alleged in its civil suit filed Thursday that a gambler named William Walters received tips and business information about Dean Foods Co. from former Dean Foods director Thomas Davis 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.
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The SEC also sued Davis and Walters, accusing them of "repeated and very profitable insider trading" by Walters based on tips he received from his long-time friend Davis. The agency is seeking injunctions and fines against them.
As a relief defendant, Mickelson is not accused of participating in insider trading, only of receiving money as a result of the scheme.
From 2008 through 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 Co.
In 2013, Davis also gave Walters inside information that Davis had gotten from a group of investors who confidentially shared their plans to buy stock in Darden Restaurants Inc., 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 Aug. 8, 2012, Mickelson sold all the Dean Foods shares he had purchased on July 30 and 31, netting him a profit of around $931,000.
The agency wants Mickelson, Davis and Walters to return "all ill-gotten gains" they received.
Mickelson was not in the field of the Byron Nelson Classic in Irving, Texas, where play began Thursday morning.
The golfer's attorney issued this statement regarding the complaint:
Almost six years ago, the Securities and Exchange Commission began an investigation into the stock trading activities of certain individuals. Over two years ago, the government became interested in a particular investment that Phil Mickelson made in 2012.
The SEC has now completed its investigation into that investment and has concluded that Phil Mickelson did not engage in any wrongdoing. The SEC has filed a civil complaint against certain individuals, including an acquaintance of Phil's, but that complaint does not assert that Phil Mickelson violated the securities laws in any way. On that point, Phil feels vindicated.
At the same time, however, Phil has no desire to benefit from any transaction that the SEC sees as questionable. Accordingly, he has entered into an agreement with the SEC under which he will return all the money he made on that 2012 investment.
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. 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.
As he moves forward, Phil remains committed to demonstrating that he fully shares the same values as the companies he represents. He very much appreciates that they have determined to continue their sponsorship agreements with him.
He is pleased that this matter is over, and he will have no further comment.
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 wouldn't discuss details about his relationship with Walters, a multimillionaire who owns several golf courses and auto dealerships. He wouldn't talk about stock tips he received, but reiterated that he did nothing wrong.
"And that's why I've been fully cooperating 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.
Mickelson has long had a reputation for being a gambler, though he has said he scaled back his habit after his son, Evan, was born in 2003. The most publicized payoff was when Mickelson and friends won $560,000 on a preseason bet (28-1 odds) that the Baltimore Ravens would win the 2001 Super Bowl.
He has a history of playing money games during the practice rounds. He occasionally gets a group of players and caddies together for dinner and small wagering during the NBA and NHL playoffs, and prominent fights.
A spokesman for Dean Foods, based in Dallas, said Thursday that Davis resigned from the company's board of directors last year and is no longer affiliated with the company. Dean Foods said it is cooperating with the government investigation.
