Apple Trades May Bolster Insider Charges Against Gambler

  • Walters is accused of reaping $43 million on Dean Foods shares
  • Prosecutors seek to allege a history of abusive investments

Add Apple Inc. to the stocks Las Vegas gambler Billy Walters is accused of profiting from based on insider tips.

In addition to alleging Walters reaped millions by trading on inside information in Dean Foods Co. at his trial next month, prosecutors want to show jurors he had a history of engaging in illegal trading in Apple in 2013 and Clorox Inc. in 2011.

Walters, who was indicted last year, is accused of making $43 million by trading on tips fed to him by Dean Foods’ former chairman Tom C. Davis, his friend and golfing buddy, who pleaded guilty and will be a key government witness. Prosecutors didn’t reveal details of the trades involving Apple and Clorox and don’t plan to seek additional charges linked to those investments.

Lawyers for Walters said it’s too late to complicate the case. For months, they have complained the government failed to specify which Dean Foods trades are allegedly based on illicit tips. On the final day that prosecutors could provide such notice, Walters said prosecutors suddenly disclosed they also want to present evidence of trading in Apple, Clorox and two other companies.

"The government has, thus, been sandbagging us the whole time," defense lawyers Barry Berke and Paul Schoeman told the federal judge. "The only purpose for introducing scurrilous but non-specific allegations is to encourage the jury to believe that Mr. Walters is a bad person or has a propensity to engage in insider trading, inferences the rules strictly forbid."

Making History

Prosecutors argue they’re entitled to present all their evidence about his trading in Dean Foods before 2008, as well as in Apple and Clorox in order to refute any claims he makes at trial that they merely followed an "innocent pattern." 

"The government would seek to admit evidence and make arguments that rebut the innocent explanation" that Walters’s lawyers have offered as a defense, Assistant U.S. Attorney Michael Ferrara said. "It is not the government that is seeking to make an issue of trading outside the indictment, but Walters."

According to the government, Walters met Davis on the golf course and became friends in the 1990, forging a friendship over "sports, golf, gambling and business." Davis passed tips about Dean Foods’s financial outlook and performance, earnings, and the spinoff of an organic food distributor in 2012. 

In return, Walters offered business opportunities, investment capital and loans totaling almost $1 million to Davis. To conceal their scheme, prosecutors said Walters gave Davis a prepaid phone to use to discuss the trades and said the two used the code words "Dallas Cowboys" when discussing the company. When he pleaded guilty last year, Davis said he threw the phone into a creek to thwart the FBI probe and destroy evidence.

U.S. Says FBI Leak Shouldn’t Derail Walters Insider-Trading Case

The case also entangled pro golfer Phil Mickelson. Armed with the information he’d obtained from Davis, Walters suggested to Mickelson that he bet on Dean Foods too. Mickelson, who isn’t accused of wrongdoing, last year agreed to pay back almost $1 million he earned in profits from his trades.

In October, the government disclosed publicly for the first time that in 2013 and 2014, they were also investigating trades by billionaire investor Carl Icahn and his attempt to buy Clorox in 2011. Icahn wasn’t accused of wrongdoing. 

Prosecutors said they also may call a witness from Wells Fargo & Co. who’d testify that Walters closed his brokerage account in 2011 at least in part because of his "suspicious trading" in Clorox.

Berke didn’t immediately return an e-mail message seeking comment. Separately, Walters has asked that the charges be dismissed because leaks to the media by an FBI agent on the case have prejudiced him. That request is pending.

The case is U.S. v. Davis, 16-cr-00338, U.S. District Court, Southern District of New York (Manhattan).

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