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Golfer Phil Mickelson Named In Federal Lawsuit Alleging Insider Trading

He does not face criminal charges.

Posted on May 19, 2016, at 12:09 p.m. ET

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Golfer Phil Mickelson is named as a relief defendant in a federal lawsuit brought by the Securities and Exchange Commission Thursday regarding insider trading.

The lawsuit, filed in the Southern District of New York, alleges Mickelson sold stock in Dean Foods in 2012 after receiving information from sports bettor Bill Walters — a longtime friend of Thomas Davis, a Dean Foods executive.

"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," the SEC complaint says. Mickelson allegedly made $931,000 from the transaction.

Mickelson is not charged with a crime. The SEC looks to order Mickelson, Davis, and Walters to relinquish profits made from the trade.

The SEC announced Mickelson has agreed to repay the $931,738.12 he made from the trading, "plus interest of $105,291.69."

Walters and Davis have been criminally charged by federal prosecutors in Manhattan in a separate indictment.

The relationship between Walters and Dean started, as many other past alleged insider trading schemes have, with golf. Prosecutors said that the two had "a personal relationship and friendship founded on a shared interest in sports, golf, gambling and business" starting in the mid-1990s. In 2007, Walters solicited Davis for money and help "to purchase a number of golf courses" — although Davis did not end up investing with Walters.

Davis allegedly shared information with Walters that led to decisions regarding Dean Foods stock in 2008 while he began working on the Dean Foods board of directors.

Prosecutors said that the scale of Walters' trading in Dean Foods stock was massive — he had profits of $32 million on paper and avoided $11 million worth of losses. "On certain trading days, [Walters'] purchases or sales based on inside information amounted to more than 30 percent of the total daily trading volume in Dean Foods stock," prosecutors said.

In about a month in 2008, Walters made a massive investment in Dean Foods thanks to information he got from Davis in a March 2008 phone call, prosecutors said. He had bought over 500,000 shares, bringing him up to over 2 million. After the company announced its earnings and the stock priced moved up almost $1, he made $2.6 million in profits.

In July 2012, Walters convinced Mickelson to buy 200,240 Dean Foods shares, which he sold within six weeks to make $931,000. At the time, Mickelson owed Walters money.

In August 2012, Dean Foods began planning to spin-off subsidiary WhiteWave foods. In communicating that plan to Walters, the two men used "Dallas Cowboys" as a code word, according to the SEC complaint.

Walters was arrested Wednesday in Las Vegas. Davis pled guilty to the charges on Monday in New York.

In a statement, U.S. Attorney Preet Bharara said: "Brazen insider trading continues to be a blot on our securities markets, and so the integrity of our markets continues to be a priority for this office. When the board member of a Fortune 500 company feeds inside information to a professional gambler who makes a fortune on well-timed trades in that company's stock, that is a form of corruption – the corruption of our markets."

The SEC complaint and the charging documents are below:

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