The Securities and Exchange Commission has filed a civil suit naming Phil Mickelson as a "relief defendant," accusing the five-time major winner of insider trading.
The suit claims Mickelson made approximately $931,000 on Dean Foods stock because of an insider tip.
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Famous sports bettor Billy Walters and former Dean Foods board chair Thomas Davis were arrested Wednesday on parallel criminal charges of securities fraud related to an investigation that Walters and Mickelson, who plays golf with Walters, profited in August 2012 from an insider tip that Dean Foods would be announcing a profitable subsidiary, The WhiteWaves Food Company.
Mickelson, who was approached twice by the Federal Bureau of Investigation on this case, was not named in those charges. By being named as a "relief defendant," Mickelson will be asked by the SEC to pay back the profit he made on the Dean Foods trade.
The SEC complaint suggests an even deeper exchange of insider information between Walters and Davis, claiming Davis tipped Walters on several occasions from 2008-12 about highly confidential information about Dean Foods, including "sneak previews of at least six of the company’s quarterly earnings announcements."
In exchange, the SEC claims Walters helped Davis with personal financial trouble by providing him with $1 million. The money was issued in two installments, used at least in part to pay off a casino debt.
Davis resigned in August 2015 after he was suspected of being the source of the insider tip to Walters.
The SEC alleges Mickelson was contacted by phone by Walters on July 27, 2012 with the spin-off information, suggesting Mickelson owed Walters a sports-betting-related debt at the time. The pair also texted the next day. Walters urged Mickelson to trade Dean Foods, which he did the next day by establishing a $2.4 million position in the stock through three separate brokerage accounts. Mickelson's other holdings totaled approximately $250,000 -- a warning sign to the SEC. A week later, Dean Foods announced the subsidiary, with the stock jumping 40 percent.
Mickelson has agreed to repay the profit to the SEC, according to his lawyer.
"The SEC has now completed its investigation into that investment and has concluded that Phil Mickelson did not engage in any wrongdoing," Mickelson's attorney, Gregory Craig, said in a statement, according to Golf Channel. "The SEC has filed a civil complaint against certain individuals, including an acquaintance of Phil's, but that complaint does not assert that Phil Mickelson violated the securities law in any way. On that point, Phil feels vindicated.
"At the same time, however, Phil has no desire to benefit from any transaction that the SEC sees as questionable. Accordingly, he has entered into an agreement with the SEC under which he will return all the money he made on that 2012 investment."
The SEC was also investigating if Walters had learned insider information from billionaire investor Carl Icahn about household product maker Clorox. Icahn had been looking to make a takeover bid for the company. That investigation did not yield charges.
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