Speaker 1: It's an insider trading case playing out like a movie,
Speaker 1: and the trial hasn't even begun. There's the legendary sports gambler,
Speaker 1: the champion golfer, the former chairman of a company worth billions.
Speaker 1: There are the burner phones allegedly used to pass along
Speaker 1: stock tips, the secret codes, the wire taps, the gambling debts,
Speaker 1: and the leaks to the media by an FBI agent
Speaker 1: now under investigation. Federal prosecutors alleged Las Vegas gambler Billy
Speaker 1: Walter has made forty three million dollars on inside tips
Speaker 1: from Tom Davis, the former chairman of Dean Foods. Walters
Speaker 1: allegedly passed on those tips to Phil Mickelson, a three
Speaker 1: time Masters tournament winner. Here's how former Manhattan US Attorney
Speaker 1: Prett Barrara described the case. When the board member of
Speaker 1: a fortune company feeds inside information to a professional gambler
Speaker 1: who makes a killing on well timed trades in that
Speaker 1: very company stock, that is a form of corruption, corruption
Speaker 1: of our markets. Nicholson was not charged, but paid back
Speaker 1: the almost one million dollars he made on Dean Food trades.
Speaker 1: Our guests are John Coffee, Professor, Columbia University, Law School
Speaker 1: and Adam Pritchard, Professor at the University of Michigan Law School.
Speaker 1: John Tom Javis has pleaded guilty and is expected to
Speaker 1: be the prosecution star witness. And this is a pretty
Speaker 1: straight case tipper to tippy with no middleman. How strong
Speaker 1: is the prosecution's case, Oh, I think comparatively it's very strong,
Speaker 1: for for three reasons. First of all, you've got the
Speaker 1: direct testimony of the tipper implicating the tippy. In many
Speaker 1: of these cases, the government only has circumstantial evidence. For example,
Speaker 1: in the famous case involving the Goldman Sacks director Mr Gupta,
Speaker 1: all they knew is that there was a phone call
Speaker 1: between the tipper and the tippy. They were close friends,
Speaker 1: and the tippy traded seconds later. That's circumstantial. Here you
Speaker 1: got this is the second point, that the tipper didn't
Speaker 1: trade himself. He's pled guilty to a found it. The
Speaker 1: only reason he would have to do that is that
Speaker 1: there was illi al least surrounding his tip to Mr
Speaker 1: waller Um if he didn't think that was guilty. This
Speaker 1: is not like a case where he's committed a half
Speaker 1: dozen defenses offenses and is trying to find one to
Speaker 1: settle on. Finally, Mr Waller is a professional gambler. If
Speaker 1: the jury learns that, I think the jury is likely
Speaker 1: to believe this guy is very comfortable taking risk, and here,
Speaker 1: at this time he took a legal risk. Okay, that
Speaker 1: sums it all up. Plus the fact that the US government,
Speaker 1: the Department Justice, has not lost an insider trading trial
Speaker 1: in the Southern District in modern memory, they're very good
Speaker 1: at commencing juries, at least in Manhattan, that insider traders
Speaker 1: broke the law. Adam, do you agree that the prosecution
Speaker 1: has an especially strong case here, and if so, does
Speaker 1: that mean that Billy Walters probably has to testify in
Speaker 1: his own defense in order to have a fighting chance.
Speaker 1: So this is a classic insider trading scenario. H Davis
Speaker 1: and Walters are are golfing buddies and Davis was passing
Speaker 1: on the information. I agree with Jack that having the
Speaker 1: testimony of the the tipper makes the government's case very strong.
Speaker 1: I expect that the defense lawyers are going to try
Speaker 1: and uh muddy the waters, try and beat up Davis
Speaker 1: on the stand for having taken a plea uh in
Speaker 1: exchange for his testimony, and they're going to make an
Speaker 1: assessment of how credible Davis is on the stand before
Speaker 1: making the decision about whether or not they're going to
Speaker 1: let their client testify. Uh. He has a history of
Speaker 1: running a foul the law on occasion, and the history
Speaker 1: of being a gambler suggests that he is a risk taker.
Speaker 1: Maybe the defense would prefer to keep him off the
Speaker 1: stand if they can, but they may have to uh
Speaker 1: throw hail Mary if Davis comes off as a credible
Speaker 1: witness Jack. How often do defendants actually help themselves when
Speaker 1: they testify, Well, we've seen very few defendants succeed at
Speaker 1: trials recently. The one case I can think of, which
Speaker 1: was a civil case, involved a famous basketball owner out there,
Speaker 1: Mr Cuban, out there in Texas, and there I think
Speaker 1: the jury was very sympathetic to him because he was
Speaker 1: a local hero a ler. Than that, the norm is
Speaker 1: the defendant doesn't take the stand because not only does
Speaker 1: he possibly get committed inside of trading, but there could
Speaker 1: be a follow up prosecution for perjury, and many judges
Speaker 1: will add to the sins if they think the defendant
Speaker 1: log Adam, do you mentioned earlier that there are allegations
Speaker 1: of FBI misconduct here? The trial judges said, the defense
Speaker 1: may ask about FBI leaks about the investigation to two newspapers,
Speaker 1: how often all would you see that affecting the case?
Speaker 1: So the defense strategy has to be that they want
Speaker 1: to show that this is a case of government overreaching
Speaker 1: and that the government was trying to try its case
Speaker 1: through the news. And if the goal is to muddy
Speaker 1: the waters, then showing misconduct by the FBI agent is
Speaker 1: a strategy that has a good deal of appeal. That
Speaker 1: doesn't involve putting Walters on the stand. It's putting the
Speaker 1: government on the stand to some extent, showing that they
Speaker 1: were pushing the boundaries. Jack about a minute. Here, there
Speaker 1: are some clues in the defense papers that they may
Speaker 1: use the argument that Walters did the research into his
Speaker 1: stock picks and he was very good at it. How
Speaker 1: convincing is that usually? Um, it could possibly work in
Speaker 1: some cases. But here, if you know he's speaking to
Speaker 1: the chairman, why do you want to do fundamental research
Speaker 1: into the company's financial statements? If the chairman is telling
Speaker 1: you where the stocks going the next couple of days,
Speaker 1: and he traded frequently between two thousand and eight and
Speaker 1: two thousand and fourteen, If he was just a fundamental trader,
Speaker 1: would be a buy and whole trader. He doesn't seem
Speaker 1: to have been there. We've been talking about the highest
Speaker 1: profile insider trading case in years. Yesterday, jury selection started
Speaker 1: in the trial of Las Vegas legend as a legendary
Speaker 1: sports gambler, Billy Walters, who was accused of making forty
Speaker 1: three million dollars on inside tips from Tom Davis, the
Speaker 1: former chairman of Dean Foods. And we've been speaking with
Speaker 1: John Coffey, professor at Columbia University Law School, and Adam Pritchard,
Speaker 1: professor at the University of Michigan Law School, Jack Golfer,
Speaker 1: Phil Mickelson's name is on the list of about fifty
Speaker 1: potential witnesses, and the judge yesterday question the jurors to
Speaker 1: see if they would be star struck, and he dismissed
Speaker 1: a female. You were saying, the look of rapture on
Speaker 1: her face at the mention of his name and her
Speaker 1: repeatedly saying it wouldn't influence her is enough for me.
Speaker 1: Tell us how a judge makes a decision to dismiss
Speaker 1: a jury. Is it a gut feeling? Oh? I think
Speaker 1: it is a somewhat intuitive feeling the judge wants to
Speaker 1: see the jury. They managed to see the jury, Yester,
Speaker 1: he didn't take long and he just felt that one
Speaker 1: person might be a little too close and beholding to
Speaker 1: a possible star witness. If Mr Michelson does testify, it
Speaker 1: will be devastating and all likelihood for Mr Waller because
Speaker 1: now they'll have him straddle at both ends with cooperating
Speaker 1: witnesses saying that the information came from Davis and that
Speaker 1: Davis passed on to Michelson, and that's going to be
Speaker 1: a very strong impact with a jury. Adam, this is
Speaker 1: a case that was brought under preperaum in the Southern
Speaker 1: District of New York. Um. He's now now out of
Speaker 1: a job there. Do you think that's going to affect
Speaker 1: this case at all or is it something that the
Speaker 1: career prosecutors can just handle on their own. Barra was
Speaker 1: not going to be in the courtroom presenting witnesses or
Speaker 1: providing the argument. This is something that the line prosecutors
Speaker 1: would have been responsible before four and will be responsible
Speaker 1: for as the trial unfold. So very strong commitment to
Speaker 1: professionalism among the prosecutors who work in the Southern District
Speaker 1: of New York, and I'm sure that they're going to
Speaker 1: be ready to try this case, and I would be
Speaker 1: very surprised if Berra's firing had any effect on the outcome. Jack.
Speaker 1: So the jury was picked. It was seven women and
Speaker 1: five men. They're going to return tomorrow morning to pick
Speaker 1: the alternates and then the trial will begin. Some lawyers
Speaker 1: say that cases one or lost in jury selection. Do
Speaker 1: you agree with that, and especially in this case, I
Speaker 1: think it can be lost. But remember, we've seen an
Speaker 1: awful lot of insider trading trials in the Southern District
Speaker 1: of New York and the government hasn't lost warm. So
Speaker 1: it's not that hard to win this kind of case,
Speaker 1: and they're stronger than normal evidence here, Adam. One name
Speaker 1: we we haven't talked about is Carl Icon, who UH
Speaker 1: is also a potential witness in the case. Can you
Speaker 1: just tell us a little bit about his potential connection
Speaker 1: to this trial. So the Icon connection is based on
Speaker 1: trading that Walters had in Clorox, which apparently prompted the
Speaker 1: investigation into UH Walters, and the information would have been
Speaker 1: conveyed through UH Davis. But the main allegations are relating
Speaker 1: to Dean Foods, the company for which Tom Davis was
Speaker 1: the chairman, and Darden Restaurants, where he was involved with
Speaker 1: an investor group that was uh contemp lading, mounting an
Speaker 1: activist campaign. So Icon's connection to the case that's going
Speaker 1: to be presented, uh seems pretty peripheral. And yeah, we
Speaker 1: have again we have about a minute Jack. How important
Speaker 1: are these insider trading cases? Was it pre Barra's emphasis
Speaker 1: on them that that lad to have so many in
Speaker 1: New York? Or are they important enough? And well, of
Speaker 1: course he has jurisdiction over Wall Street and over the
Speaker 1: trading firms, and any trade that goes across the New
Speaker 1: York's doctors change is within his jurisdiction. I think we
Speaker 1: had a lot of them because he found networks and
Speaker 1: he very rigorously and systematically followed the network. It's like
Speaker 1: pulling on a PC yarn and eventually the whole sweater
Speaker 1: unravels and he got all of those people. This case
Speaker 1: is important for a number of reasons. It's actually going
Speaker 1: to significantly change FBI and prosecutorial behavior because the judge
Speaker 1: was very upset, very angry with the leaking that the
Speaker 1: FBI agents did to the major media, including the Times,
Speaker 1: in the Wall Street Journal, and until two weeks ago,
Speaker 1: we didn't know what he was going to dismiss the
Speaker 1: case because of that misconduct. He has instead ruled that
Speaker 1: the government should pursue and investigate and possibly prosecute the
Speaker 1: FBI agent. And I think that means for the future,
Speaker 1: the FBI isn't going to be quite as free and
Speaker 1: easy sharing their files with the major media. So that's
Speaker 1: a change right there. Well, we look forward to talking
Speaker 1: to you both again as this trial progresses. That's John Coffee,
Speaker 1: Professor Columbia University Law School and Adam Pritchard, Professor of
Speaker 1: the University of Michigan Law School.