Billy Walters, professional gambler and owner of Walters Golf (center) enters federal court with his attorneys in New York
They were friends for more than 20 years, bonding over sports, golf, gambling and business. But now, former Dean Foods Co. chairman Tom C. Davis is telling a Manhattan jury a story that could send his former pal, Las Vegas gambler Billy Walters, to prison for almost a decade.
Davis, 68, took the stand Tuesday and testified in Walters’s insider-trading trial that he passed him Dean Foods boardroom secrets in exchange for almost USD1 million in loans. Davis said he used the money for gambling debts and to pay for a bitter divorce.
Walters, 70, made about $43 million trading Dean Foods securities as a result, according to prosecutors. He could be sentenced to eight to 10 years in prison if convicted, U.S. Attorney Brooke Cucinella had said in court.
“It started out pretty innocently,” Davis told the jury. He said he provided Walters with public and nonpublic information and “it grew until I became a virtual conduit of nonpublic information to him.”
Davis was an investment banker for more than 20 years before being appointed Dean Foods chairman. He was also a central figure in the insider-trading scheme, prosecutors said. A Harvard MBA, Davis owed $178,000 to a private jet business venture and $100,000 to a Dallas charity he managed. Regulators said he used charity money to cover a casino debt.
He pleaded guilty last year to passing inside information to Walters and agreed to cooperate with the government in the gambler’s prosecution.
On Tuesday, in response to questions from Cucinella, Davis told his story, from his initial meeting with Walters at the Del Mar Country Club, north of San Diego, in the mid-1990s, through seven years of feeding Walters inside information to his decision, following a mild stroke in 2015, to come clean and confess to his crimes.
“I think we became friends relatively quickly,” Davis told the jury. He said he owned a vacation home in La Jolla, California, not far from one of Walters’s homes in Rancho Santa Fe. Walters also owned property in Las Vegas, Florida and Cabo San Lucas, Mexico, Davis said.
Walters’s lawyer, Barry Berke, told jurors last week that Davis is a liar who implicated his former friend because he was trying to avoid prison after embezzling money
Davis admitted to lying to FBI agents when they first visited his Dallas home on May 28, 2014 during his guilty plea in May. Throughout the federal probe, he said he lied repeatedly from 2014 to 2015, including perjuring himself before the SEC.
“I was scared to death,” Davis said. “I’d made some horrible mistakes and was just trying to cover it up.” U.S. District Judge P. Kevin Castel interrupted and pressed Davis for an explanation for his lies. “I hoped this would all go away, frankly,” Davis responded. “I lied to everybody at the time.”
Davis also admitted to destroying a burner phone – which Walters called the “Bat Phone” – by throwing it into a creek near his home, following the FBI visit.
“He was very specific the day he gave me the Bat Phone and said that he would prefer that I use the Bat Phone when we talked about Dean Foods,” Davis said. Walters also told him that whenever he had information to pass on to call him on his home phone and ask “to get a cup of coffee,” Davis testified.
“He then asked me to refer to Dean Foods as the Dallas Cowboys,” Davis said.
FBI divers searched Turtle Creek in Dallas but never found the phone.
Walters arranged a $625,000 loan for Davis and later a line of credit, from which Davis borrowed $350,000. Davis never fully repaid either debt. True to their secret bargain, Walters never attempted to collect “even a penny,” according to the SEC.
But Davis said Walters’s attitude changed after he arranged the $625,000 loan.
“I became indebted to him,” Davis said. “He became more demanding of me for information.”
Davis said his day of reckoning came after he had a minor stroke in November 2015 that required surgery.
“I sat down and had a lot of time to think about who I was, what I’d done,” Davis told the jury., “I really thought I couldn’t do this any more. I couldn’t continue to lie.”
Early in 2016, he said he met with federal prosecutors and investigators and confessed all during their first session.
When the FBI first approached Davis in 2014, agents asked him to wear a wire during a meeting with Walters and to record the conversation, he said. He said he refused.
On advice from his lawyer, “I decided it wasn’t something I should be doing,” Davis said. Patricia Hurtado, Bloomberg
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