WEBVTT - Celebrity Testimony Expected at Walters Trial (Audio) 0:00:00.080 --> 0:00:03.119 It's an insider trading case playing out like a movie, 0:00:03.320 --> 0:00:07.320 and the trial hasn't even begun. There's the legendary sports gambler, 0:00:07.400 --> 0:00:11.400 the champion golfer, the former chairman of a company worth billions. 0:00:11.440 --> 0:00:14.160 There are the burner phones allegedly used to pass along 0:00:14.240 --> 0:00:18.200 stock tips, the secret codes, the wire taps, the gambling debts, 0:00:18.200 --> 0:00:20.720 and the leaks to the media by an FBI agent 0:00:20.800 --> 0:00:25.439 now under investigation. Federal prosecutors alleged Las Vegas gambler Billy 0:00:25.520 --> 0:00:28.960 Walter has made forty three million dollars on inside tips 0:00:29.000 --> 0:00:32.840 from Tom Davis, the former chairman of Dean Foods. Walters 0:00:32.880 --> 0:00:35.960 allegedly passed on those tips to Phil Mickelson, a three 0:00:35.960 --> 0:00:39.879 time Masters tournament winner. Here's how former Manhattan US Attorney 0:00:39.920 --> 0:00:43.440 Prett Barrara described the case. When the board member of 0:00:43.440 --> 0:00:48.600 a fortune company feeds inside information to a professional gambler 0:00:48.640 --> 0:00:51.559 who makes a killing on well timed trades in that 0:00:51.800 --> 0:00:55.480 very company stock, that is a form of corruption, corruption 0:00:55.520 --> 0:00:59.240 of our markets. Nicholson was not charged, but paid back 0:00:59.280 --> 0:01:02.600 the almost one million dollars he made on Dean Food trades. 0:01:03.200 --> 0:01:06.720 Our guests are John Coffee, Professor, Columbia University, Law School 0:01:06.760 --> 0:01:09.880 and Adam Pritchard, Professor at the University of Michigan Law School. 0:01:10.600 --> 0:01:13.720 John Tom Javis has pleaded guilty and is expected to 0:01:13.720 --> 0:01:16.679 be the prosecution star witness. And this is a pretty 0:01:16.760 --> 0:01:21.280 straight case tipper to tippy with no middleman. How strong 0:01:21.480 --> 0:01:25.520 is the prosecution's case, Oh, I think comparatively it's very strong, 0:01:25.600 --> 0:01:28.000 for for three reasons. First of all, you've got the 0:01:28.080 --> 0:01:32.679 direct testimony of the tipper implicating the tippy. In many 0:01:32.720 --> 0:01:36.880 of these cases, the government only has circumstantial evidence. For example, 0:01:36.880 --> 0:01:40.480 in the famous case involving the Goldman Sacks director Mr Gupta, 0:01:40.840 --> 0:01:42.640 all they knew is that there was a phone call 0:01:42.720 --> 0:01:45.600 between the tipper and the tippy. They were close friends, 0:01:45.840 --> 0:01:49.880 and the tippy traded seconds later. That's circumstantial. Here you 0:01:49.960 --> 0:01:53.360 got this is the second point, that the tipper didn't 0:01:53.360 --> 0:01:56.720 trade himself. He's pled guilty to a found it. The 0:01:56.800 --> 0:01:58.800 only reason he would have to do that is that 0:01:58.880 --> 0:02:02.640 there was illi al least surrounding his tip to Mr 0:02:02.720 --> 0:02:06.000 waller Um if he didn't think that was guilty. This 0:02:06.040 --> 0:02:07.800 is not like a case where he's committed a half 0:02:07.880 --> 0:02:10.840 dozen defenses offenses and is trying to find one to 0:02:10.880 --> 0:02:15.520 settle on. Finally, Mr Waller is a professional gambler. If 0:02:15.560 --> 0:02:18.240 the jury learns that, I think the jury is likely 0:02:18.320 --> 0:02:22.440 to believe this guy is very comfortable taking risk, and here, 0:02:22.480 --> 0:02:25.440 at this time he took a legal risk. Okay, that 0:02:25.520 --> 0:02:28.440 sums it all up. Plus the fact that the US government, 0:02:28.800 --> 0:02:32.280 the Department Justice, has not lost an insider trading trial 0:02:32.800 --> 0:02:36.040 in the Southern District in modern memory, they're very good 0:02:36.080 --> 0:02:39.600 at commencing juries, at least in Manhattan, that insider traders 0:02:39.639 --> 0:02:43.120 broke the law. Adam, do you agree that the prosecution 0:02:43.160 --> 0:02:46.600 has an especially strong case here, and if so, does 0:02:46.639 --> 0:02:49.320 that mean that Billy Walters probably has to testify in 0:02:49.360 --> 0:02:52.239 his own defense in order to have a fighting chance. 0:02:53.440 --> 0:02:59.000 So this is a classic insider trading scenario. H Davis 0:02:59.040 --> 0:03:03.040 and Walters are are golfing buddies and Davis was passing 0:03:03.040 --> 0:03:06.160 on the information. I agree with Jack that having the 0:03:06.240 --> 0:03:12.040 testimony of the the tipper makes the government's case very strong. 0:03:12.800 --> 0:03:16.639 I expect that the defense lawyers are going to try 0:03:16.720 --> 0:03:20.320 and uh muddy the waters, try and beat up Davis 0:03:20.320 --> 0:03:24.120 on the stand for having taken a plea uh in 0:03:24.200 --> 0:03:27.520 exchange for his testimony, and they're going to make an 0:03:27.560 --> 0:03:33.600 assessment of how credible Davis is on the stand before 0:03:33.639 --> 0:03:36.360 making the decision about whether or not they're going to 0:03:36.480 --> 0:03:42.520 let their client testify. Uh. He has a history of 0:03:43.240 --> 0:03:47.240 running a foul the law on occasion, and the history 0:03:47.280 --> 0:03:50.960 of being a gambler suggests that he is a risk taker. 0:03:51.840 --> 0:03:54.960 Maybe the defense would prefer to keep him off the 0:03:55.040 --> 0:03:59.560 stand if they can, but they may have to uh 0:03:59.720 --> 0:04:02.520 throw hail Mary if Davis comes off as a credible 0:04:02.560 --> 0:04:07.720 witness Jack. How often do defendants actually help themselves when 0:04:07.760 --> 0:04:14.640 they testify, Well, we've seen very few defendants succeed at 0:04:14.680 --> 0:04:17.760 trials recently. The one case I can think of, which 0:04:17.800 --> 0:04:22.560 was a civil case, involved a famous basketball owner out there, 0:04:22.720 --> 0:04:25.520 Mr Cuban, out there in Texas, and there I think 0:04:25.560 --> 0:04:28.280 the jury was very sympathetic to him because he was 0:04:28.320 --> 0:04:31.800 a local hero a ler. Than that, the norm is 0:04:31.920 --> 0:04:35.479 the defendant doesn't take the stand because not only does 0:04:35.520 --> 0:04:38.920 he possibly get committed inside of trading, but there could 0:04:38.960 --> 0:04:42.640 be a follow up prosecution for perjury, and many judges 0:04:42.680 --> 0:04:45.320 will add to the sins if they think the defendant 0:04:45.400 --> 0:04:50.440 log Adam, do you mentioned earlier that there are allegations 0:04:50.440 --> 0:04:53.640 of FBI misconduct here? The trial judges said, the defense 0:04:53.680 --> 0:04:58.880 may ask about FBI leaks about the investigation to two newspapers, 0:04:59.400 --> 0:05:02.279 how often all would you see that affecting the case? 0:05:03.520 --> 0:05:07.680 So the defense strategy has to be that they want 0:05:07.760 --> 0:05:11.240 to show that this is a case of government overreaching 0:05:11.560 --> 0:05:16.239 and that the government was trying to try its case 0:05:16.480 --> 0:05:22.480 through the news. And if the goal is to muddy 0:05:22.520 --> 0:05:28.480 the waters, then showing misconduct by the FBI agent is 0:05:29.680 --> 0:05:32.760 a strategy that has a good deal of appeal. That 0:05:32.800 --> 0:05:35.919 doesn't involve putting Walters on the stand. It's putting the 0:05:35.960 --> 0:05:41.000 government on the stand to some extent, showing that they 0:05:41.080 --> 0:05:45.800 were pushing the boundaries. Jack about a minute. Here, there 0:05:45.800 --> 0:05:49.479 are some clues in the defense papers that they may 0:05:49.600 --> 0:05:54.000 use the argument that Walters did the research into his 0:05:54.080 --> 0:05:56.200 stock picks and he was very good at it. How 0:05:56.279 --> 0:06:01.720 convincing is that usually? Um, it could possibly work in 0:06:01.800 --> 0:06:04.800 some cases. But here, if you know he's speaking to 0:06:04.839 --> 0:06:07.640 the chairman, why do you want to do fundamental research 0:06:07.680 --> 0:06:10.600 into the company's financial statements? If the chairman is telling 0:06:10.600 --> 0:06:12.640 you where the stocks going the next couple of days, 0:06:13.000 --> 0:06:15.520 and he traded frequently between two thousand and eight and 0:06:15.560 --> 0:06:19.000 two thousand and fourteen, If he was just a fundamental trader, 0:06:19.080 --> 0:06:21.479 would be a buy and whole trader. He doesn't seem 0:06:21.520 --> 0:06:23.480 to have been there. We've been talking about the highest 0:06:23.520 --> 0:06:28.320 profile insider trading case in years. Yesterday, jury selection started 0:06:28.320 --> 0:06:32.159 in the trial of Las Vegas legend as a legendary 0:06:32.200 --> 0:06:35.520 sports gambler, Billy Walters, who was accused of making forty 0:06:35.560 --> 0:06:38.760 three million dollars on inside tips from Tom Davis, the 0:06:38.800 --> 0:06:41.960 former chairman of Dean Foods. And we've been speaking with 0:06:42.040 --> 0:06:45.679 John Coffey, professor at Columbia University Law School, and Adam Pritchard, 0:06:45.720 --> 0:06:49.440 professor at the University of Michigan Law School, Jack Golfer, 0:06:49.440 --> 0:06:52.040 Phil Mickelson's name is on the list of about fifty 0:06:52.120 --> 0:06:56.760 potential witnesses, and the judge yesterday question the jurors to 0:06:56.760 --> 0:06:59.359 see if they would be star struck, and he dismissed 0:06:59.400 --> 0:07:02.279 a female. You were saying, the look of rapture on 0:07:02.320 --> 0:07:04.360 her face at the mention of his name and her 0:07:04.400 --> 0:07:07.760 repeatedly saying it wouldn't influence her is enough for me. 0:07:08.640 --> 0:07:12.480 Tell us how a judge makes a decision to dismiss 0:07:12.480 --> 0:07:15.840 a jury. Is it a gut feeling? Oh? I think 0:07:15.880 --> 0:07:19.480 it is a somewhat intuitive feeling the judge wants to 0:07:19.520 --> 0:07:21.760 see the jury. They managed to see the jury, Yester, 0:07:21.840 --> 0:07:24.520 he didn't take long and he just felt that one 0:07:24.600 --> 0:07:28.040 person might be a little too close and beholding to 0:07:28.200 --> 0:07:32.400 a possible star witness. If Mr Michelson does testify, it 0:07:32.480 --> 0:07:36.280 will be devastating and all likelihood for Mr Waller because 0:07:36.320 --> 0:07:39.560 now they'll have him straddle at both ends with cooperating 0:07:39.560 --> 0:07:42.880 witnesses saying that the information came from Davis and that 0:07:43.080 --> 0:07:46.200 Davis passed on to Michelson, and that's going to be 0:07:46.280 --> 0:07:49.720 a very strong impact with a jury. Adam, this is 0:07:49.760 --> 0:07:52.960 a case that was brought under preperaum in the Southern 0:07:53.040 --> 0:07:56.040 District of New York. Um. He's now now out of 0:07:56.040 --> 0:07:58.160 a job there. Do you think that's going to affect 0:07:58.160 --> 0:07:59.520 this case at all or is it something that the 0:07:59.640 --> 0:08:03.600 career prosecutors can just handle on their own. Barra was 0:08:03.640 --> 0:08:07.320 not going to be in the courtroom presenting witnesses or 0:08:07.960 --> 0:08:12.640 providing the argument. This is something that the line prosecutors 0:08:12.680 --> 0:08:17.360 would have been responsible before four and will be responsible 0:08:17.400 --> 0:08:22.400 for as the trial unfold. So very strong commitment to 0:08:22.480 --> 0:08:26.600 professionalism among the prosecutors who work in the Southern District 0:08:26.640 --> 0:08:29.680 of New York, and I'm sure that they're going to 0:08:29.760 --> 0:08:32.600 be ready to try this case, and I would be 0:08:32.720 --> 0:08:39.120 very surprised if Berra's firing had any effect on the outcome. Jack. 0:08:39.200 --> 0:08:42.400 So the jury was picked. It was seven women and 0:08:42.440 --> 0:08:44.679 five men. They're going to return tomorrow morning to pick 0:08:44.880 --> 0:08:49.920 the alternates and then the trial will begin. Some lawyers 0:08:50.040 --> 0:08:54.400 say that cases one or lost in jury selection. Do 0:08:54.440 --> 0:08:57.520 you agree with that, and especially in this case, I 0:08:57.559 --> 0:09:00.480 think it can be lost. But remember, we've seen an 0:09:00.520 --> 0:09:03.880 awful lot of insider trading trials in the Southern District 0:09:03.960 --> 0:09:06.920 of New York and the government hasn't lost warm. So 0:09:07.000 --> 0:09:09.360 it's not that hard to win this kind of case, 0:09:09.400 --> 0:09:13.559 and they're stronger than normal evidence here, Adam. One name 0:09:13.600 --> 0:09:17.439 we we haven't talked about is Carl Icon, who UH 0:09:17.880 --> 0:09:20.680 is also a potential witness in the case. Can you 0:09:20.720 --> 0:09:23.439 just tell us a little bit about his potential connection 0:09:23.520 --> 0:09:28.960 to this trial. So the Icon connection is based on 0:09:30.240 --> 0:09:36.680 trading that Walters had in Clorox, which apparently prompted the 0:09:36.880 --> 0:09:42.040 investigation into UH Walters, and the information would have been 0:09:42.080 --> 0:09:48.000 conveyed through UH Davis. But the main allegations are relating 0:09:48.000 --> 0:09:51.240 to Dean Foods, the company for which Tom Davis was 0:09:51.360 --> 0:09:56.600 the chairman, and Darden Restaurants, where he was involved with 0:09:56.640 --> 0:10:00.760 an investor group that was uh contemp lading, mounting an 0:10:00.760 --> 0:10:05.720 activist campaign. So Icon's connection to the case that's going 0:10:05.760 --> 0:10:11.720 to be presented, uh seems pretty peripheral. And yeah, we 0:10:11.760 --> 0:10:15.000 have again we have about a minute Jack. How important 0:10:15.000 --> 0:10:20.040 are these insider trading cases? Was it pre Barra's emphasis 0:10:20.160 --> 0:10:23.240 on them that that lad to have so many in 0:10:23.679 --> 0:10:27.400 New York? Or are they important enough? And well, of 0:10:27.440 --> 0:10:30.200 course he has jurisdiction over Wall Street and over the 0:10:30.200 --> 0:10:32.640 trading firms, and any trade that goes across the New 0:10:32.720 --> 0:10:36.319 York's doctors change is within his jurisdiction. I think we 0:10:36.360 --> 0:10:38.440 had a lot of them because he found networks and 0:10:38.520 --> 0:10:42.640 he very rigorously and systematically followed the network. It's like 0:10:42.679 --> 0:10:45.640 pulling on a PC yarn and eventually the whole sweater 0:10:45.760 --> 0:10:49.160 unravels and he got all of those people. This case 0:10:49.280 --> 0:10:51.760 is important for a number of reasons. It's actually going 0:10:51.800 --> 0:10:56.360 to significantly change FBI and prosecutorial behavior because the judge 0:10:56.480 --> 0:10:59.520 was very upset, very angry with the leaking that the 0:10:59.600 --> 0:11:02.920 FBI agents did to the major media, including the Times, 0:11:02.960 --> 0:11:05.400 in the Wall Street Journal, and until two weeks ago, 0:11:05.679 --> 0:11:07.400 we didn't know what he was going to dismiss the 0:11:07.440 --> 0:11:11.480 case because of that misconduct. He has instead ruled that 0:11:11.600 --> 0:11:15.200 the government should pursue and investigate and possibly prosecute the 0:11:15.280 --> 0:11:17.880 FBI agent. And I think that means for the future, 0:11:18.280 --> 0:11:20.360 the FBI isn't going to be quite as free and 0:11:20.400 --> 0:11:24.160 easy sharing their files with the major media. So that's 0:11:24.160 --> 0:11:27.840 a change right there. Well, we look forward to talking 0:11:27.840 --> 0:11:31.800 to you both again as this trial progresses. That's John Coffee, 0:11:31.840 --> 0:11:35.559 Professor Columbia University Law School and Adam Pritchard, Professor of 0:11:35.640 --> 0:11:37.920 the University of Michigan Law School.