On Thursday, May 19, federal prosecutors brought criminal charges against Thomas C. Davis, the former chairman of Dean Foods Company, the nation’s largest dairy processor and distributor, according to its website; and William T. Walters, a businessman with a reputation as the most successful gambler in the country.
Brands distributed by Dean Foods include Land O’Lakes, Lehigh Valley, Tuscan, Berkeley Farms, and DairyPure.
Davis and Walters have been charged with insider trading as the result of a federal investigation that has been ongoing since at least 2014, and also face civil charges brought against them by the Securities and Exchange Commission.
Davis, who joined the board of Dean Foods in 2001 and was eventually appointed to chairman, stepped down in August 2015 after news of a federal probe became public. Davis is suspected of leaking insider trading tips to Walters between 2008 and 2012.
According to documents filed by the SEC, “Davis tipped Walters with highly confidential information concerning Dean Foods including sneak previews of at least six of the company’s quarterly earnings announcements and advance notice of the spin-off of Dean Foods’s profitable subsidiary, The WhiteWave Foods Company (‘WhiteWave’).
“In 2013, Davis also provided Walters with inside information that Davis obtained from a group of investors who confidentially shared their plans to buy the stock of Darden Restaurants, Inc. (‘Darden’) with the goal of pushing the company to make corporate changes. Based on these tips, Walters traded Dean Foods and Darden securities and reaped illicit trading profits and avoided losses totaling at least $40 million.”
In return, Walters “helped Davis with his financial problems,” including giving Davis nearly $1 million to settle debts, including $100,000 that Davis allegedly took from a women’s shelter he managed, in order to settle a gambling debt with a Las Vegas casino.
Also named in the SEC lawsuit is pro golfer Philip A. Mickelson, who allegedly received insider information from Walters that led him to trade in Dean Foods stock, a week before the WhiteWave spin-off caused a 40 percent increase in the stock value, earning Mickelson approximately $931,000.
In a statement, a lawyer for Davis said that his client “is pleased to be assisting the government in its investigation.”