Insider-trading probe building for 3 years
In the summer of 2011, a series of winning stock trades raised immediate red flags for financial regulators.
The traders — a cross-section of investors including championship golfer Phil Mickelson and high-rolling gambler and golf-course owner William T. Walters — collectively reaped several million dollars betting on the consumer-products company Clorox and one other stock, according to people briefed on the matter who spoke anonymously because they were not authorized to discuss the investigation.
The trades— options contracts to buy Clorox stock— came just days before billionaire investor Carl C. Icahn announced an unsolicited takeover bid for the company that drove up the stock price. And trading records indicated that the bets came not just from Mickelson but also from at least one other investor connected to Walters and the golfing world, one of the people briefed on the matter said. That investor, another person said, is not now under investigation.
The previously unreported details about the size and scope of the trading, emerging a day after a federal insider-trading investigation came to light, might seem to stack up in the government’s favor. As federal authorities examine whether Icahn leaked details of his Clorox bid to Walters, the people said, they are exploring a theory that Walters might have passed the information to Mickelson.
Authorities initially planned to secure cooperation from a top Icahn employee, but they shifted gears when they lacked the leverage to do so, the people briefed on the matter said.
The focus then turned to Mickelson, whom authorities hoped to scare into cooperating. As one of America’s mostpopular athletes, Mickelson had much to lose under the glare of the government’s spotlight.
But when the FBI approached Mickelson — first pulling him off a plane at Teterboro Airport in New Jersey last year, the people said, and then confronting him on Thursday at the Memorial Tournament in Dublin — Mickelson had little to offer.
In the airport discussion last year, which lasted no more than an hour, the people said, Mickelson pledged to cooperate but explained that he did not know Icahn and had no clue that the stock tips might have been improper. On Thursday, Mickelson said, he instructed FBI agents to “speak to my lawyers.”
Mickelson, Walters and Icahn have not been accused of wrongdoing. Even if Icahn did leak secret information about his firm’s intentions with Clorox, he might have done so legally. It would have been illegal if he breached a duty of confidentiality to his own investors.
Through his agent, Mickelson released a statement saying that he had “done absolutely nothing wrong.”
In an interview, Icahn said: “I don’t give out inside information,” adding that “for 50 years, I have had an unblemished record.” Icahn argued that any suggestion he had done anything wrong was “irresponsible.”
Walters, reached on Friday, said, “While I don’t have any comment, pal, I’ll talk to you later.”
In 1992, Walters was acquitted of illegal-gambling charges. Since then, the Nevada attorney general has charged Walters with money laundering stemming from his gambling operation, but courts dismissed that case.