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Sunday, April 21, 2024 | Back issues
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Inside-Trading Case Painted in Mythic Proportions

Opening the inside-trading trial of a legendary sports gambler, federal prosecutors told jurors Wednesday that Billy Walters is "a cheater trying to look like a genius."

MANHATTAN (CN) - Opening the inside-trading trial of a legendary sports gambler, federal prosecutors told jurors Wednesday that Billy Walters is "a cheater trying to look like a genius.”

Already a day behind schedule thanks to a blizzard Tuesday, the trial in Lower Manhattan comes nearly a year after Walters’ indictment on charges that took down his friend at Dean Foods, former chairman Thomas Davis.

Dean Foods is the company behind Land O’Lakes, Horizon and other major supermarket brands. Davis has already pleaded guilty to sharing tips on Dean Foods that allowed Davis to profit by tens of millions of dollars.

Translating the simple codes that Walters and Davis allegedly used to discuss trades, Assistant U.S. Attorney Michael Ferrara said the dynamic duo referred to their prepaid burners as the "bat phone" and spoke of Dean Foods as the Dallas Cowboys.

As his trading pattern shows, when it came to Dean Foods, “Walters frequently knew tomorrow's news today," Ferrara added.

The prosecutor boiled the pattern down to four steps: “Call from Davis. Call from Walters [to his stockbroker]. Announcement. Profit."

Ferrara put Walters’ net profit at close to $40 million, saying inside information helped Walters make more than $30 million in profits while avoiding substantial losses.

Ahead of a 30 percent drop in Dean Foods shares, Walters managed to sell all of his stock in the company "like it was on fire,” Ferrara said.

If he had traded those shares with the rest of the public, the prosecutor noted, Walters would have lost $7 million.

Ferrara told the jury they will hear from Davis himself and several other witnesses including former Dean Foods CEO Gregg Engles, Walters' stockbrokers, an FBI agent and an employee for FINRA, short for the Financial Industry Regulatory Authority.

One big name missing from the witness list, though named by the Securities and Exchange Commission as an uncharged beneficiary of the scheme, is celebrity golfer Phil Mickelson.

Defense attorney Barry Berke paced the length of the jury box in laps throughout his opening statement. "The only thing Bill Walters is guilty of is being friends with and trusting Tom Davis," said Berke, an attorney with the firm Kramer Levin Naftalis & Frankel.

Berke put the jury’s civic duty in classical terms, retelling the Aesop fable where a dolphin trying to help men shipwrecked outside of Athens was nearly tricked into giving a ride to a deceitful monkey that one of the sailors had kept onboard.

Though the monkey tried to impress his importance on the dolphin, his lies caught up with him when he called Piraeus a very good family friend. The dolphin knew Piraeus was the iconic port of Athens, however, and left the monkey to drown.

Berke told the jury they would be the "the guards of gate of justice." Urging them to distrust whatever testimony they hear from Davis, Berke called the Dallas executive "a smooth-talking investment banker” who got caught using a battered woman's charity as his personal piggy bank.

Berke called the allegations against Walters "lies, speculation, innuendo,” and recited a quote he attributed to Mark Twain. "A lie can travel halfway around the world while the truth is putting on its shoes,” he said.

The case is being handled by the U.S. Attorney's Office’s Securities and Commodities Fraud Task Force, with Assistant U.S. Attorneys Brooke Cucinella and Daniel Goldman in charge of the prosecution.

Recently ousted U.S. Attorney Preet Bharara was still at the helm in December when the U.S. Attorney's Office admitted in a letter to presiding U.S. District Judge P. Kevin Castel that federal agents had leaked confidential information from the Walters investigation.

Walters faces four counts of securities fraud and three counts of wire fraud, as well as charges of conspiracy to commit securities fraud and conspiracy to commit wire fraud.

Prosecutor Ferrara told the jury that the case is simple.

"It is cheating,” Ferrara said. “It is securities fraud. It is wire fraud."

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Categories / Criminal, Securities

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