Billy Walters just lost his largest wager ever — and this time, it’s likely to cost him much more than cash.
Widely considered the nation’s most successful sports gambler, Walters was convicted Friday in the highest-profile — and most colorful — insider-trading trial in years. Testimony featured golfer Phil Mickelson and billionaire investor Carl Icahn, as well as a seamy world of gambling debts, stock tips delivered on burner phones and charity money used for prostitutes.
"If I would have made a bet I would have lost," Walters told reporters as he left court. "I just did lose the biggest bet of my life. Frankly I’m in shock."
"To say I was surprised would be the biggest understatement of my life," he added.
The verdict was delivered as Mickelson started second-round play at The Masters in Augusta, Georgia.
Walters built a fortune with wagers on football and basketball and bragged that he never had a losing year. But he faced the longest of odds in taking on the Justice Department, which wins almost 95 percent of its cases.
Now — after a four-week trial — the 70-year-old Las Vegas gambler faces a lengthy prison term. The maximum sentence on the most serious charge is 20 years. The jury found him guilty of all 10 counts of fraud and conspiracy after about five hours of deliberations.
“Billy Walters lost his bet that he could cheat the securities market on a massive scale,” acting Manhattan U.S. Attorney, Joon H. Kim, said in a statement. “Walters underestimated law enforcement’s resolve to pursue and catch those who cheat the market.”
Unless he’s successful on appeal, Walters will be forced to walk away from Las Vegas businesses that include golf courses, auto dealerships and car-rental agencies, with total revenue of $500 million in 2013, according to testimony from his company’s controller. Walters, who didn’t testify at the trial in Manhattan federal court, has said he owns seven homes and a $20 million jet.
For prosecutors, the verdict is a dramatic comeback after recent defeats in a lengthy insider-trading crackdown.
After sending dozens of traders and corporate executives to prison, the government’s effort to combat fraud on Wall Street began to go off the rails when two portfolio managers successfully challenged their conviction in a 2014 appeal — a ruling that made it tougher for the government to win and led to the dismissal of a dozen other cases. Former Manhattan U.S. Attorney Preet Bharara had said the decision would create a “bonanza” for people leaking tips to friends and family.
The verdict “shows how aggressive the government is going to continue to be with insider trading,” said Peter Henning, a law professor at Wayne State University in Detroit and former prosecutor. “The appeals court ruling did not have the kind of debilitating effect that the U.S. Attorney’s office claimed it would have.”
Dean Foods
The government convinced jurors in Manhattan federal court that Walters traded on tips from Tom C. Davis, the former chairman of Dean Foods Co., who testified that he fed Walters inside information that helped the gambler make more than $43 million over six years.
Prosecutors described an old-fashioned insider-trading scheme: Davis would tip Walters, Walters would trade on it, and Davis would either make a profit or avoid a loss. The prosecutors claimed Walters would make a call to Davis’s disposable phone — a so-called Bat Phone, which Davis claimed he eventually tossed into a creek behind his home — and then make trades in Dean Foods stock soon afterward.
In her closing argument to the jury, prosecutor Brooke Cucinella called Davis the gambler’s "man on the inside" and argued that Walters’s use of disposable phones was proof he was aware he was breaking the law.
Davis, Walters’s friend, business partner and golfing pal of more than 20 years, was the government’s star witness. He said he passed on information because Walters provided him with loans of almost $1 million that he needed to pay off gambling debts, cover failed investments and finance a bitter divorce. Davis, 68, pleaded guilty to a dozen separate crimes and agreed to cooperate with prosecutors in a bid for leniency when he’s sentenced.
Desperate Man
Barry Berke, Walters’s lawyer, depicted Davis as a desperate man willing to do anything to avoid prison, including lying to get his former friend convicted. Berke grilled Davis on his gambling habits and propensity to spend time with prostitutes, including the misappropriation of $150,000 from a charity for a battered women’s shelter. Davis used the money to pay off a casino debt and for prostitutes, Berke said. And he went and partied in Sin City after making the deal with the government.
“Isn’t it true that on the day you signed your agreement with the government, you arranged to go on a gambling junket to Las Vegas?” Berke asked Davis.
Davis responded that the trip was a birthday present for himself and he traveled with his wife and friends.
“Counselor, I’d been under a lot of pressure, and had a good time,” Davis said.
Walters didn’t need inside information to profit on the stock market, his lawyers suggested with the witnesses they called to testify.
Walters’s brokers said the gambler was an astute investor who did assiduous research before placing a bet on a company — sometimes as much as $50 million in one shot. Alan Duncan, one of the brokers, said he considered Walters “the Babe Ruth of Risk.” Another, Rob Miller, said Walters got most of his trading ideas from Icahn.
Icahn wasn’t accused of any wrongdoing.
Walters, who didn’t testify at the trial, has beaten the odds before. Born in Kentucky, the son of a professional gambler and a teenage mother, Walters began shooting pool — nine ball — at age 4 and by 10, he had progressed to gambling. Decades ago, he was acquitted of state gambling charges after a trial and won dismissal of state indictments accusing him of conspiracy and money laundering, according to court papers filed in a 2014 lawsuit in Las Vegas.
The trial offered jurors a glimpse of a rarefied world where corporate executives mixed with professional athletes on some of the country’s top golf courses. Walters was friends with Icahn and Mickelson, as well as Davis.
‘Sure Winner’
Prosecutors said Walters shared one “sure winner” tip he got from Davis with Mickelson, allowing the golfer to make about $931,000 when Dean Foods announced a lucrative spin-off of a unit that caused the stock price to surge. Mickelson used the money to repay a gambling debt to Walters, transferring $1.95 million, according to records shown jurors.
Mickelson wasn’t charged with wrongdoing although he agreed to repay the profit he made. He also wasn’t called as a witness after making it clear to lawyers that he would invoke his Fifth Amendment right against self-incrimination, Berke told the judge.
The case is U.S. v. Walters, 16-cr-00338, U.S. District Court, Southern District of New York (Manhattan).
This article was provided by Bloomberg News.
