Tags: mickelson | icahn | scandal | fraud

Gambler Linked to Icahn-Mickelson Faced a $15M Loss

Friday, 06 June 2014 11:04 AM EDT

William “Billy” Walters, the Las Vegas gambler who U.S. authorities are said to be investigating in connection with possible insider trading in 2011 and 2012, was at the time facing a multimillion-dollar debt to the government over a soured golf-course deal, according to court records.

In early 2011, Walters told CBS’s “60 Minutes” in a rare interview that he wagered millions of dollars on football and basketball and had never had a losing year as one of Vegas’s biggest sports bettors. Walters had a $20 million jet and seven homes, the program reported.

Around the same time, though, Walters owed as much as $15.25 million to the Federal Deposit Insurance Corp. stemming from the 2006 sale of the Stallion Mountain golf club in Las Vegas by a company he owned, according to documents in two lawsuits reviewed by Bloomberg News.

The buyers purchased the club using a bank loan personally guaranteed by Walters. After the buyers defaulted in 2008, Community Bank of Nevada told Walters he had to make good on the loan. When the bank failed and was taken over by the FDIC, Walters owed the money to the agency.

In 2012, a judge ordered Walters to make a payment of $11.2 million to satisfy the loan, interest and other fees, FDIC spokesman Greg Hernandez said. “Mr. Walters did pay,” Hernandez said in an e-mail.

Walters’s Outflows

That liability offers a glimpse into Walters’s outflows at around the time of suspected stock-market trades that have caught investigators’ attention.

The Federal Bureau of Investigation in New York, the U.S. Securities and Exchange Commission and Manhattan U.S. Attorney Preet Bharara are looking into large option trades by Walters and golfer Phil Mickelson ahead of billionaire investor Carl Icahn’s $10.2 billion offer in 2011 for Clorox Co., as well as trading by Mickelson and Walters in Dean Foods Co. in 2012, according to a person familiar with the matter.

Both Mickelson and Walters made Clorox trades, said the person, who requested anonymity because the matter isn’t public. Investigators are examining whether Icahn shared information on the Clorox takeover attempt with Walters, and whether Walters then shared it with Mickelson, the person said.

Walters, Mickelson and Icahn haven’t been accused of wrongdoing. Icahn, 78, who didn’t respond to requests for comment, has said he has “never” leaked secrets or spoken to Mickelson. The golfer, 43, has denied the allegations. T.R. Reinman, a spokesman for Lagardere Unlimited, the agency representing Mickelson, declined to comment on his behalf.

Car Dealerships

An attorney for Walters, Barry Langberg, said in an e-mail that Walters “was not involved in any insider trading.” Langberg declined to comment late yesterday on suits related to the Stallion Mountain sale.

Walters and his companies also owned or co-owned other courses, including Bali Hai and Desert Pines in Las Vegas, as well as auto dealerships in Kentucky, in the years after the housing collapse and credit crisis squeezed markets in housing, auto sales and golf.

Kentucky-born Walters, 67, has shed little light on his gambling winnings or net worth. It isn’t clear from court filings to what degree his share of the proceeds from the 2006 Stallion Mountain sale would have offset his loan liability, or how much of a bite such a liability would take from his wealth.

Walters has won dismissal of three gambling-related indictments, Dennis Kennedy, a lawyer who represented Walters in lawsuits over the golf-course sale, said in court in 2012.

Failed Golf Deal

Details of Walters’s bank debt and failed golf course deal are included in a 2008 lawsuit filed against him and associates by the investor group that purchased the club. They’re also spelled out in a related case Walters brought against the investors and others.

Stallion Mountain, about seven miles east of the Las Vegas strip, was one of four Nevada courses owned by Walters and his companies. In 2006, one of his companies sold Stallion Mountain in a transaction structured so that its 26 buyers could roll over proceeds from previous investments while deferring taxes.

According to court papers, the group paid $24.48 million, using $9.23 million in cash and borrowing $15.25 million from the Community Bank of Nevada, guaranteed by Walters. Stallion Mountain ran into financial trouble soon after its sale. In July 2008, the investor group defaulted on the loan. The course was temporarily closed, and Community Bank purchased it with $5 million in credit at a foreclosure sale in December 2008.

The insolvency spurred a flurry of litigation. In their lawsuit, the purchasers claimed that Walters and his associates had failed to disclose in a private placement memorandum that revenue had been declining before the sale and that internal forecasts indicated the course would lose money afterward. The course’s buyers sought to recover for their investment losses.

‘Breathtaking Pace’

“They didn’t tell the truth about Stallion Mountain,” Adam Thurston, the investors’ lawyer, said at the start of a trial in Las Vegas federal court in January 2012, according to a transcript. “Stallion Mountain was bleeding money at a breathtaking pace.”

Thurston declined to comment for this article.

At the trial, Kennedy, Walters’s lawyer, told jurors that his client didn’t cheat the buyers. Instead, he said, Stallion Mountain’s troubles resulted from the economic downturn. He accused the buyers of damaging the course’s finances by installing property managers who replaced 38 acres of turf with desert landscaping to reap water rebates.

Rock Piles

“It destroyed the playability of large parts of the golf course,” Kennedy told jurors. “You can’t play the ball off of the rock piles.”

Even worse, Kennedy told them, Community Bank told Walters he was responsible for the loan he’d guaranteed. Later, after the Nevada Financial Institutions Division closed the bank in August 2009 and appointed the FDIC as receiver, the agency insisted that Walters pay, he said.

“Mr. Walters is on the hook,” Kennedy told jurors. “You know what the FDIC does to Mr. Walters? They come and they say, ‘Can we have our $15.25 million and all the interest, all the penalties, everything else?’”

The investors’ lawsuit settled on undisclosed terms after the lawyers’ opening arguments.

Meanwhile, in mid-2012, a Nevada state judge in Clark County ordered Walters to pay the FDIC $11.2 million in principal and fees to satisfy the guaranteed loan.

Elusive Bettor

In 2011, in the run-up to that trial, Walters was interviewed by “60 Minutes” correspondent Lara Logan, who called him an elusive and feared bettor. Along with detailing his sophisticated sport-wagering business, he took the reporter to see the charity he finances for the mentally impaired.

The segment ended with Walters speaking of his stumbles on Wall Street. He said he’d been hurt speculating on Enron Corp., WorldCom Inc. and Tyco International Ltd.

“I’ve been swindled out of quite a bit of money on the stock market,” Walters said. “I’ve run into a lot of bad guys, a lot of thieves -- I mean, they’d steal the Lord’s Supper. But I can tell you, percentage-wise, I ran into many more with suits and ties on than I have with the gamblers.”

Investigators are looking into Walters’s stock-market trades. On July 15, 2011, shares in Oakland, California-based Clorox rose after Icahn offered to buy the company for about $10.2 billion. Options traders who bought the company’s calls on July 11 stood to profit almost eightfold.

Clorox Trades

Soon after, the Financial Industry Regulatory Authority, Wall Street’s self-regulatory group that monitors trading, alerted the SEC to a number of suspicious Clorox trades that investigators traced to Walters and Mickelson, according to a person familiar with the matter.

Icahn later withdrew his bid.

Icahn had known Walters for almost two decades by then. He met Walters when his company owned the Stratosphere Hotel in Las Vegas, the Wall Street Journal reported on May 30. Icahn bets on football games, and the two have discussed stocks, the newspaper said. Walters and Mickelson have golfed together and also talked about stocks, the paper said.

Betsy Feuerstein, a spokeswoman for Bharara; Peter Donald, an FBI spokesman; and Florence Harmon, an SEC spokeswoman, declined to comment on Walters.

The buyers’ lawsuit is FSP Stallion v. Luce et al, 08- cv-01155, U.S. District Court, District of Nevada (Las Vegas).

© Copyright 2024 Bloomberg News. All rights reserved.

William "Billy" Walters, the Las Vegas gambler who U.S. authorities are said to be investigating in connection with possible insider trading in 2011 and 2012, was at the time facing a multimillion-dollar debt to the government over a soured golf-course deal, according to...
mickelson, icahn, scandal, fraud
Friday, 06 June 2014 11:04 AM
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