A visit from the FBI two years ago prompted Dean Foods Co.’s former Chairman Tom C. Davis to hurl his cell phone into a nearby Dallas creek in an attempt to cover up an illegal stock-trading plot, according to a transcript of his guilty plea.
In a secret hearing in lower Manhattan on May 16, Davis, 67, described to a federal judge how he repeatedly tried to derail an insider-trading probe as the government began closing in.
On Thursday, Davis and sports gambler William “Billy” Walters were charged for a brazen insider-trading scheme, in which Davis allegedly provided tips to Walters in exchange for loans, business opportunities and investment capital. At Walters’ suggestion, pro golfer Phil Mickelson bet on Dean Foods too, and he has agreed to pay back almost $1 million he earned in profits from his trades. Mickelson isn’t accused of wrongdoing.
According to a transcript of his plea hearing, which was made public late Thursday, Davis lied to investigators when FBI agents visited his home on May 28, 2014, to ask the executive if he’d passed nonpublic information to Walters, his long-time friend.
“After the FBI visited my home, I knowingly destroyed the prepaid cellular phone that Billy Walters had previously provided me,” Davis told U.S. District Judge P. Kevin Castel in Manhattan. “I attempted to dispose of the cellular phone by throwing it into a creek near my home in Dallas.”
Davis said Walters gave him the phone to use when passing on inside tips. He said he tossed it in the creek to thwart the FBI probe and destroy the evidence.
Davis’ attorney, Christopher Clark, said in an email that his client “is pleased to be assisting in the investigation being conducted by the Department of Justice.”
As the chairman of a Fortune 500 company, Davis was a central figure in the insider scheme, according to Manhattan U.S. Attorney Preet Bharara. A Harvard MBA who worked for more than 20 years as an investment banker, Davis had accumulated mounting personal debts, including a $178,000 bill on a private jet business venture.
Unable to maintain an executive lifestyle after he’d retired from corporate finance, Davis repeatedly turned to Walters for help in covering hundreds of thousands of dollars in gambling debts that he owed a Las Vegas casino, according to a Securities and Exchange Commission complaint against Davis, Walters and Mickelson.
The men tried to avoid scrutiny by using the prepaid mobile phone and by speaking in code, referring to Dean Foods as the “Dallas Cowboys.” Walters profited by about $43 million from Davis’s insider tips, Bharara said.
Davis told the judge that when he began providing the tips to Walters, “I expected that I would receive personal benefits,” including a $625,000 loan and a line of credit. “Billy Walters was aware that I had received personal benefits, from both him and his associates.”
(c) 2016, Bloomberg · Patricia Hurtado