SEC investigating Phil Mickelson for insider trading

[boogielicious]

Created to prevent - doesn't mean that they do it very well. Ask Mr. Madoff

Umm, he went to jail and is still there, so they didn't miss him!

[Kieran123]

Umm, he went to jail and is still there, so they didn't miss him!

They missed him for over 20 years - multiple 'check ins' too.

[Patch]

If you want further info on this alleged mess, google "Billy Walters". Mickleson would have been smart to stay away from him in the first place.

[topspin4hand]

I finally sat down and read some of the allegations in details.  Realizing they're just allegations, I can see how Phil has some explaining to do.

4 days before the their expiration Mickelson and this big time gambler, who self-reportedly pulls down $50~$60mm per year in his gambling and other biz activities, buy a gang of Clorox call options, giving them the right to buy Clorox at a set price.  Then Carl Icahn announces his big stake in the company and the shares spike up in price.

1. You don't buy out of the money call options with 4 days left in real size unless you KNOW the price will rise.  If price doesn't rise, you lose your $$.

2.  They bought close to 5,000 calls, which gave them options on 500,000 shares at $70.

3. Icahn announces his stake and offer to takeover the company and shares spike well above $70.  Options went from about $50 per option to over $300 per option.  A $230k investment became worth roughly $1.4mm.

4. Nobody's asking this question in the golf media loudly yet: why is Phil hanging around with this big time gambler??  If this were MJ or Lebron, they'd get SKEWERED by the media.  Gamblers and athletes don't mix.

The timing of all this stuff is just too curious.  The trade was too brazen and the profit too large.  If no charges are ever announced, I'll be shocked.  Somebody knew and somebody made a big profit on illegal material non public information.

On the face of it, this could be in the same league as the the Tiger Woods situation. possibly worse.

[mvmac]

Irony Files: Leaked Investigation Story May Hurt Case

We of course have no clue about any facts related to the Icahn-Walters-Mickelson probe into possible insider trading . But last Friday's stories from the WSJ and New York Times , combined with an FBI appearance at the Memorial Tournament, suggested based on past cases that things were wrapping up.

Or perhaps they were stalled?

But there is also the very real possibility that the case is razor thin and the forthcoming stories prompted an FBI visit to try and get witness cooperation from Mickelson before it went public?

The possibilities are endless so I'll stop speculating now and instead point you to an interesting supposition by Tyler Durden (thanks Dave Shedloski for Tweeting ) which suggests that the leaked story hurts investigator's chances of wire-tapping the subjects, possibly eliminating the option to make a case.

On Morning Drive, Gary Williams discussed the latest on the case with CNBC's Scott Wapner , including the wiretapping element.

Billy Walters, meanwhile, issued a statement. He's not done anything wrong, if you were looking for the Cliff's Notes version.

Tod Leonard wrote about the Mickelson-Walters friendship, and in particular their money games at Rancho Santa Fe that "are more than $5 per side."

As members of the Rancho Santa Fe Golf Club, pro golfer Phil Mickelson and gambler Billy Walters occasionally meet early on Sunday mornings, caddies in tow, for what observers say are matches whose stakes are more than $5 per side.

Walters told “60 Minutes” in 2011 that he once made $1 million betting during a golf round and has won $400,000 on a single hole.

Mickelson is both rich and daring enough to partake in high-stakes money affairs on the golf course. In Phil’s world, if you’re not betting, you’re not trying.

The question is: Did the mutual admiration and camaraderie between the two cross a line that would get them in trouble for insider stock trading?

[WUTiger]

The FBI and SEC don’t mess around when they smell something fishy. Martha Stewart was not convicted of insider trading but went to jail for lying to the authorities. Phil needs to be as upfront as possible with the Feds during the investigation. They hate being lied to.

The FBI and SEC go overboard sometimes. They like to press innuendo and try to ruin your reputation when they don't have a case. The FBI is really playing show-off coming to the Memorial Tournament; this automatically makes me question the strength of their case.

"...upfront as possible"? Hope you're not suggesting Phil roll over even if he's done nothing wrong.

Decades long problem with the SEC: It's become a jobs program for the American Bar Association. It hires too many lawyers when it should be hiring more people with advanced financial training who can ferret out serious violations.

[MS256]

The FBI and SEC go overboard sometimes. They like to press innuendo and try to ruin your reputation when they don't have a case. The FBI is really playing show-off coming to the Memorial Tournament; this automatically makes me question the strength of their case.

"...upfront as possible"? Hope you're not suggesting Phil roll over even if he's done nothing wrong.

Decades long problem with the SEC: It's become a jobs program for the American Bar Association. It hires too many lawyers when it should be hiring more people with advanced financial training who can ferret out serious violations.

I thought this was an interesting article about acquittals in some similar cases, but it also does mention the 80% success rate for convictions.

http://www.natlawreview.com/article/government-regulators-continue-to-make-insider-trading-trial-priority-mixed-success

I don't know but I assume much of the "success rate" includes plea bargains where people would rather take reduced charges than risk a trial.

I agree that showing up at the Memorial parking lot was total grandstanding.

[topspin4hand]

I agree that showing up at the Memorial parking lot was total grandstanding.

+1.  I wonder if that maneuver was after a lot of obfuscation on the part of Phil and his legal team.  Phil and Co. really don't have to cooperate fully w/o subpoenas or charges.

[ghalfaire]

The FBI and SEC don’t mess around when they smell something fishy. Martha Stewart was not convicted of insider trading but went to jail for lying to the authorities. Phil needs to be as upfront as possible with the Feds during the investigation. They hate being lied to.

Let us hope.  I was never sure why Martha lied to investigators since she apparently had not done anything wrong.  Most of us who are not financial experts listen to our  financial adviser on whatever investments we have, as long as he/she is successful anyway, and wouldn't have a clue as to whether they are using inside information or  not.

[mvmac]

Roundup: Latest Stories On Icahn-Mickelson-Walters Probe

Some more thoughtful and provocative pieces have appeared now that the world has had time to digest last week's leaked stories to the WSJ and New York Times .

Peter Finch posts a fascinating Q&A; with Jim Benjamin , a former federal prosecutor in the U.S. Attorney's office for the Southern District of New York. He's pretty sure the leaks did not come from the FBI or SEC and his explanation of Insider Trading's definition is pretty disturbing (in that even the experts can't point to a simple explanation under the law).

Sometimes as a part of investigations, agents will approach witnesses intentionally when they’re not expecting it. From the government’s perspective, this can be helpful, because they may be more candid when their guard is down. On the other hand, after he finished his round at the Memorial? I don’t understand that.

The SWJ's Alexandra Bergon takes a closer look at Billy Walters and you understand why he's probably the center of the entire investigaton.

Sports-betting legend William "Billy" Walters built a fortune by acquiring better information than others and using a complex system to turn it into profits.

"He is the most respected sports bettor in the world," said RJ Bell, who runs a website selling sports-betting picks. "One of the things that differentiates him is the quality of the information that he's betting."

John Tamny at Forbes (thanks reader Bob ) says "to the extent that Mickelson traded on information that originated with Icahn, he’s a hero for having so done so."

Applied to Mickelson, assuming the allegations about his trading history are true, the fact that he may have utilized Icahn’s expertise means that he provided the marketplace with essential information. Icahn is a genius, and while there are vague laws concerning “insider trading,” Mickelson’s presumed trades brought precious knowledge to the marketplace. What should bother readers are not the allegations concerning Mickelson, but instead insider trading laws that in the words of George Gilder blind the marketplace. How odd that we have laws that are explicit in their intent to deprive the marketplace of information that allegedly came from one of the world’s greatest investors.

[boogielicious]

Book him Dano!   Just kidding .

I hate when anything is leaked to the press.  It especially galls me when it is illegally obtained.  I liken it to receiving stolen goods.

[Spitfisher]

Created to prevent - doesn't mean that they do it very well. Ask Mr. Madoff

Madoff was convicted of a Ponzi scheme

Let us hope.  I was never sure why Martha lied to investigators since she apparently had not done anything wrong.  Most of us who are not financial experts listen to our  financial adviser on whatever investments we have, as long as he/she is successful anyway, and wouldn't have a clue as to whether they are using inside information or not.

She didn't do anything wrong? She knew exactly what she was doing . and would have got away with it had it not been reported by a rookie broker- who was obligated to do so. Before you read below she was also involved of cooking the books (destroying  evidence) before being investigated, Lying and obstructing the investigation.

Martha Stewart was told by her friend Sam Waksal that his company ImClone’s cancer drug had been rejected by the Food and Drug Administration before this information was made public. This rejection was a huge blow to his company and the price of its stock went down dramatically. $52 down to a couple of bucks.  However, Martha Stewart wasn’t financially hurt because she had her broker sell her 4000 shares before this news was made public. she was found guilty and sentenced on July 16, 2004 to five months in prison, five months of home confinement, and two years probation for lying about a stock sale, conspiracy, and obstruction of justice.

[Kieran123]

Madoff was convicted of a Ponzi scheme

Again...yes he was. But how long did it take them to figure it out? It was right there all along. Madoff even said he couldn't believe how obvious it was and how useless SEC were

[newtogolf]

Let us hope.  I was never sure why Martha lied to investigators since she apparently had not done anything wrong.  Most of us who are not financial experts listen to our  financial adviser on whatever investments we have, as long as he/she is successful anyway, and wouldn't have a clue as to whether they are using inside information or  not.

In the justice system, "most" people are not allowed to use ignorance as an excuse.  When Martha's broker told her to sell she would have or should have asked why since at the time there wasn't any public information that would indicate there was a reason to dump the stock.  If she didn't have access to this  "insider" information she would have lost money just as everyone else did.

In Phil's case, the investigation is looking into whether Phil gained insider knowledge from Walters who supposedly was tipped off by Icahn that his company was looking to take over Clorox.   The SEC needs to prove that Icahn leaked information to Walters and that Walters shared the information with Phil.

[ghalfaire]

Madoff was convicted of a Ponzi scheme

She didn't do anything wrong? She knew exactly what she was doing . and would have got away with it had it not been reported by a rookie broker- who was obligated to do so. Before you read below she was also involved of cooking the books (destroying  evidence) before being investigated, Lying and obstructing the investigation.

Martha Stewart was told by her friend Sam Waksal that his company ImClone’s cancer drug had been rejected by the Food and Drug Administration before this information was made public. This rejection was a huge blow to his company and the price of its stock went down dramatically. $52 down to a couple of bucks.  However, Martha Stewart wasn’t financially hurt because she had her broker sell her 4000 shares before this news was made public. she was found guilty and sentenced on July 16, 2004 to five months in prison, five months of home confinement, and two years probation for lying about a stock sale, conspiracy, and obstruction of justice.

She was only convicted of lying to the SEC.  If any of the above alleged action could have been proven she would have been charged, tried, and convicted.  Since she was not even  charged it seems a little unfair to state the above as fact.

[ghalfaire]

In the justice system, "most" people are not allowed to use ignorance as an excuse.  When Martha's broker told her to sell she would have or should have asked why since at the time there wasn't any public information that would indicate there was a reason to dump the stock.  If she didn't have access to this  "insider" information she would have lost money just as everyone else did.

In Phil's case, the investigation is looking into whether Phil gained insider knowledge from Walters who supposedly was tipped off by Icahn that his company was looking to take over Clorox.   The SEC needs to prove that Icahn leaked information to Walters and that Walters shared the information with Phil.

Are you saying that if your investment adviser calls and say sell your IBM you have to ask the broker "are you using inside information to recommend this decision?" or you can be sent to jail as an accomplice if he/she is using inside information.  The reason most have advisers is because whatever our expertise is it doesn't extend into the realm of buying and selling paper and/or we don't want to spend hours a day monitoring our nest egg.  So we find someone who is competent and honest (not easy to do but they are around) and then tend to trust their judgement (but make sure we monitor enough so the know we're looking).

[newtogolf]

Are you saying that if your investment adviser calls and say sell your IBM you have to ask the broker "are you using inside information to recommend this decision?" or you can be sent to jail as an accomplice if he/she is using inside information.  The reason most have advisers is because whatever our expertise is it doesn't extend into the realm of buying and selling paper and/or we don't want to spend hours a day monitoring our nest egg.  So we find someone who is competent and honest (not easy to do but they are around) and then tend to trust their judgement (but make sure we monitor enough so the know we're looking).

I have investment advisors.  I would be surprised that anyone that has one would act just on their word and not ask more questions to support their advice.

Investment advisors, unless they are your close friends, should never be blindly trusted.  They work for an investment firm that may have a completely different agenda than you do.  They encourage customers to buy and sell stocks all the time for their own financial gains.

If my investment advisor called me and told me I should sell IBM, I'd ask why.  I'd ask for backup for his reasons.  If he can't provide me backup I'm going to question where he got the information.  If he can convince me the information is legit I'd consider taking his advice.

The difference is, any investment I'm making isn't going to attract the attention of the SEC.  If my "guy" gets all his clients to dump IBM stock based on insider information, it's going to raise a flag at the SEC and he and his firm are getting investigated.

My guess is Walters and Phil made some high $$$ investments and it raised a flag, so it's not surprising the SEC would investigate the timing and amount of the transaction.

[Spitfisher]

She was only convicted of lying to the SEC.  If any of the above alleged action could have been proven she would have been charged, tried, and convicted.  Since she was not even  charged it seems a little unfair to state the above as fact.

what part of the following are you having trouble with?

On June 4, 2003, Stewart was indicted by the government on nine counts, including charges of securities fraud and obstruction of justice