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BREAKING STORY: FULL TEXT SEC Complaint and DOJ Indictment and Information in Dean Foods Insider Trading Case

May 19, 2016

On May 19, 2016, the Securities and Exchange Commission ("SEC") filed an insider trading civil Complaint in the United States District Court for the Southern District of New York ("SDNY"). Securities and Exchange Commission, Plaintiff, v. William T. Walters and Thomas C. Davis, Defendants -AND- The Walters Group, Nature Development B.V., and Philip A. Mickelson, Relief Defendants (Complaint, SDNY, 16-CV-03722 / May 19, 2016). As set forth in the "Summary" portion of the SEC Complaint:

1. This case involves repeated and very profitable insider trading by professional
sports bettor William "Billy" Walters based on tips received from his long-time friend, Thomas C. Davis, a director of Dean Foods Company ("Dean Foods"). From 2008 through 2012, Davis tipped Walters with highly-confidential information concerning Dean Foods including sneak previews of at least six of the company's quarterly earnings announcements and advance notice of the spin-off of Dean Foods's profitable subsidiary, The WhiteWave Foods Company ("WhiteWave"). In 2013, Davis also provided Walters with inside information that Davis obtained from a group of investors who confidentially shared their plans to buy the stock of Darden Restaurants, Inc. ("Darden") with the goal of pushing the company to make corporate changes. Based on these tips, Walters traded Dean Foods and Darden securities and reaped illicit trading profits and avoided losses totaling at least $40 million.

2. In exchange for insider trading tips, Walters helped Davis with his financial
problems by, among other things, providing Davis with almost $1,000,000. In April 2010, Walters arranged for a friend to provide Davis with $625,000. In November 2011, Walters provided Davis with an additional $350,000, money Davis needed to repay certain debts, including $100,000 Davis had wrongfully taken from a Dallas-based charity he managed that raised funds for a battered women and children's shelter. Davis misappropriated the funds from the charity in August 2011 in order to finance the repayment of a gambling debt he owed to a Las Vegas casino.

3. In July 2012, Walters called professional golfer Philip A. Mickelson. Mickelson
had placed bets with Walters both before and after July 2012 and owed Walters money at the time of the telephone call. At a time when Walters was in possession of material nonpublic information regarding Dean Foods, Walters communicated with Mickelson and urged Mickelson to trade in Dean Foods stock, which Mickelson did the next trading day in three brokerage accounts he controlled. About one week later, Dean Foods's stock price jumped 40% on the announcements of the WhiteWave spin-off and strong second quarter ("Q2") 2012 earnings, allowing Mickelson to profit by approximately $931,000.

4. By engaging in this scheme, Defendants have violated (and unless permanently
enjoined and restrained, will continue to violate) Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5

In a "SEC Announces Insider Trading Charges in Case Involving Sports Gambler and Board Member Pro Golfer Agrees to Repay Trading Profits" (SEC Press Release, 2016-92 / May 19, 2016), the SEC advises that without admitting or denying the SEC Complaint's allegations, that Relief Defendant Mickelson had "agreed to pay full disgorgement of his trading profits totaling $931,738.12 plus interest of $105,291.69.

Separately, the United States Attorney for the Southern District of New York ("SDNY USA") announced on May 19, 2016, that it had arrested William T. Walters and charged him with conspiracy, securities fraud and wire fraud arising from his alleged participation in a Dean Foods Company insider trading scheme that purportedly ran from 2008 to 2014. United States of America, Plaintiff, v. William T. Walters a/k/a "Billy, Defendant (Indictment, SDNY, 16-CR-338 / May 19, 2016).

Also, the SDNY USA announced that Thomas C. Davis had pled guilty to an Information alleging conpsiracy, securities fraud, wire fraud, obstruction of justice, and perjury arising from his alleged participating in the Dean Foods insider trading scheme. United States of America, Plaintiff, v. Thomas C. Davis, Defendant (Information, SDNY, 16-CR-338 / May 19, 2016).

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