Dive Brief:
- Federal prosecutors said Thursday former Dean Foods chairman Thomas C. Davis has been charged with insider trading, along with sports bettor William T. Walters. Both are also facing civil litigation by the SEC.
- Davis resigned from his post at Dean Foods just before the company's earnings report in early August.
- Davis was being accused of leaking inside information about Dean Foods' 2012 WhiteWave Foods spinoff to Las Vegas professional gambler Walters, according to Wall Street Journal sources in August.
Dive Insight:
Davis's lawyer told The New York Times he is cooperating with the government, a key point in this case as it is "one of the most notable insider trading cases since an appellate court overturned two prominent convictions."
The investigation focused on Dean Foods trading shares; the alleged trading happened amid Dean Foods' subsidiary spinoff (WhiteWave Foods) discussions in 2012. Authorities wanted to know if Walters received the spinoff tip from a Dean Foods board member, and then passed that along to pro golfer Phil Mickelson, previous sources told The New York Times.
According to Manhattan federal court documents, Davis allegedly gave Walters private Dean Foods and Darden Restaurants information from at least 2008 to 2014.
According to indictment charges, Walters gifted Davis about $1 million in mostly unpaid loans in exchange for this information.
The case serves as a warning to Wall Street about the future of insider trading cases, given the famous appellate court ruling in 2014 that overturned hedge fund manager convictions.