Prominent Ghanaian Influencer Charged For Role In Romance Scheme And Extradited From United Kingdom To The United States
Preet Bharara, the United States Attorney for the Southern District of New York, Diego Rodriguez, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced the arrest of WILLIAM T. WALTERS, a/k/a “Billy,” on charges of participating in a scheme, from in or about 2008 through in or about 2014, to commit insider trading principally relating to securities of Dean Foods Company (“Dean Foods” or the “Company”). In addition, Mr. Bharara announced the unsealing of charges against THOMAS C. DAVIS, who pled guilty and admitted to his participation in the scheme earlier this week. On a number of occasions beginning in 2008, DAVIS, who routinely possessed material, nonpublic information through his service on the Dean Foods’ Board of Directors, betrayed his duty of confidentiality to the Company by providing this information to WALTERS before it was publicly announced. As alleged in the charging documents, WALTERS, in turn, used the confidential information to execute profitable trades in Dean Foods that netted him realized and unrealized gains and avoided losses of more than $40 million. In exchange, WALTERS provided DAVIS with substantial pecuniary benefits, including, among other things, capital for joint business ventures and two loans of nearly $1 million that DAVIS largely did not repay.
WALTERS, who is charged with conspiracy, securities fraud, and wire fraud, was arrested yesterday in Las Vegas, Nevada, and will be presented later today before a United States Magistrate Judge in the District of Nevada. His case is before United States District Judge P. Kevin Castel in the Southern District of New York. On Monday, DAVIS pled guilty before Judge Castel to conspiracy, securities fraud, wire fraud, obstruction of justice, and perjury.
In a separate action, the Securities and Exchange Commission (“SEC”) filed civil charges against WALTERS and DAVIS.
U.S. Attorney Preet Bharara said: “Tom Davis has admitted that, over five years as a Dean Foods board member, he repeatedly and systematically fed material nonpublic information about the company to Billy Walters, who we allege benefited handsomely by trading on that information. With a direct channel into Dean Foods’ boardroom, Walters allegedly traded in advance of good news and bad news alike. As alleged, it was all good news for Walters, because he had the information before everyone else – he had tomorrow’s headlines today. Brazen insider trading continues to be a blot on our securities markets, and so the integrity of our markets continues to be a priority for this office. When the board member of a Fortune 500 company feeds inside information to a professional gambler who makes a fortune on well-timed trades in that company’s stock, that is a form of corruption – the corruption of our markets. And we don’t let corruption stand. We intend to prove every one of these allegations in a court of law.”
FBI Assistant Director-in-Charge Diego Rodriguez said: “Trading on inside information for personal gain causes untold devastation in the stock and commodities markets. This kind of criminal behavior keeps wealth concentrated among the powerful, prevents everyday investors from turning a profit, and undermines public confidence in the integrity of the marketplace. The FBI and our federal partners will continue to work to protect Americans from the devastating consequences of these deceptive practices.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “These individuals were more concerned with their ‘high-roller’ image and the continuation of their lavish lifestyles than they were with adhering to fair and equitable investment regulations. This arrest should send a message to all that no matter how much money you accrue, no one is above the law and all will be prosecuted equally for their illegal investment practices.”
According to the allegations in the charging documents unsealed today in Manhattan federal court, including the Indictment, and statements made in court proceedings:
From in or about 2008 through in or about 2014, WALTERS and DAVIS, among others, participated in a scheme to commit insider trading principally related to securities of Dean Foods, a Fortune 500 company that is the largest processor and distributor of fresh milk in the United States. From in or about 2001 until on or about August 7, 2015, DAVIS served as a member of the Board of Directors of Dean Foods (the “Board”), in which role he regularly possessed material, nonpublic information about Dean Foods, including about the Company’s financial performance and results, including quarterly earnings results; contemplated and actual corporate transactions; and other significant corporate and strategic developments (the “Inside Information”). In furtherance of the scheme, DAVIS violated his duties of trust and confidence to Dean Foods by providing Inside Information to WALTERS in advance of public announcements. WALTERS, knowing that DAVIS owed duties of trust and confidence to the Company, used the Inside Information to execute profitable trades in Dean Foods stock. In total, WALTERS’s trading on the basis of Inside Information netted realized and unrealized profits of approximately $32 million and avoided additional losses of approximately $11 million. In return for DAVIS providing the Inside Information to WALTERS, WALTERS, among other things, provided capital to DAVIS for joint business ventures and made two loans to DAVIS for approximately $1 million in total, which DAVIS largely did not repay.
In furtherance of the scheme, and to avoid detection by law enforcement, WALTERS provided DAVIS with a prepaid cellular phone to use when passing Inside Information to WALTERS. Moreover, WALTERS further instructed DAVIS to use code words when discussing the Inside Information, including by referring to Dean Foods as the “Dallas Cowboys.”
Specific Examples of WALTERS’s Insider Trading in Dean Foods
On June 25, 2008, in an unanticipated announcement near the end of the second quarter, Dean Foods informed the public that it had revised upwards its earnings guidance for that quarter. From June 19 to June 23, 2008, WALTERS purchased nearly four million shares of Dean Foods – which constituted between 29 and 37 percent of the daily trading volume of Dean Foods stock on those days – on the basis of tips provided to WALTERS by DAVIS about the second-quarter financial performance. As a result of trading on the Inside Information provided by DAVIS, WALTERS earned realized and unrealized profits of approximately $6 million.
On or about Friday, April 9, 2010, WALTERS and DAVIS met in Las Vegas, Nevada. During that meeting, WALTERS agreed to provide DAVIS with a loan of $625,000, and DAVIS provided Inside Information to WALTERS about Dean Foods’ recent engagement of investment bankers to investigate strategic possibilities related to the separation of WhiteWave-Alpro (the “WhiteWave Spinoff”), a segment of Dean Foods that produced and distributed organic and other branded food and beverage products. On Monday, April 12, 2010, the next trading day, and up through April 15, WALTERS purchased approximately 1.5 million shares of Dean Foods. Less than three weeks later, DAVIS tipped WALTERS about Dean Foods’ forthcoming first-quarter earnings announcement, which DAVIS knew did not meet Wall Street’s expectations. On the following two days, Monday, May 3, and Tuesday, May 4, WALTERS sold the approximately 1.5 million shares of Dean Foods he had purchased in April, which sales constituted 29 and 16 percent, respectively, of the daily trading volume for those days. On May 10, 2010, Dean Foods publicly announced its poor earnings results for the first quarter of 2010 and suspended full-year guidance, which caused the stock to decrease by approximately 28 percent that day. As a result of his timely sales of Dean Foods stock the prior week, WALTERS avoided losses of $7.3 million. Moreover, beginning on May 10, 2010, and continuing through May 14, 2010, WALTERS purchased approximately 1.5 million shares of Dean Foods stock, thereby re-establishing his previous position in the stock at a reduction in cost of $9.5 million.
In addition, on or about May 8, 2012, DAVIS provided Inside Information to WALTERS about Dean Foods’ positive first-quarter earnings and its intention to pursue the WhiteWave Spinoff, on the basis of which WALTERS purchased 1.2 million shares of Dean Foods on May 8 and 9, 2012. On May 9, 2012, Dean Foods announced its earnings results for the first quarter of 2012, which were positive, and that the Company was “mindful of the opportunity . . . to perhaps accrete value for our shareholder.” After this announcement, Dean Foods stock rose by approximately 10 percent. In the ensuing months, DAVIS repeatedly provided WALTERS with additional Inside Information about the WhiteWave Spinoff, including the expected timing of the Spinoff announcement on August 7, 2012. From July 13 through July 31, 2012, WALTERS purchased an additional 2.8 million shares of Dean Foods to raise his total position to 4 million shares.
On August 7, 2012, Dean Foods announced and that it intended to spin off WhiteWave through an initial public offering (“IPO”), and that the Company would maintain ownership over more than 80 percent of WhiteWave stock following the IPO. On August 8, 2012, the day after the announcement, Dean Foods’ stock price increased by approximately 40 percent, netting WALTERS unrealized profits of approximately $17.1 million on his 4 million shares of Dean Foods stock.
After the announcement of the WhiteWave Spinoff, DAVIS continued to provide WALTERS with Inside Information about the forthcoming WhiteWave IPO. By October 25, 2012, the day the IPO was priced above expectations at $17 per share, WALTERS had increased his position in Dean Foods stock to more than 5.3 million shares, which were worth approximately $100 million. By the end of August 2013, after WALTERS received shares of WhiteWave stock in a dividend made to Dean Foods shareholders in May 2013, WALTERS had sold all of his securities in Dean Foods and WhiteWave for gross proceeds of approximately $110 million.
WALTERS’s Insider Trading in Darden Restaurants, Inc.
In or about August 2013, DAVIS received, pursuant to a non-disclosure agreement, a confidential investment plan (the “Investment Plan”) from an investment firm in New York, New York (“Investment Firm A”) related to Darden Restaurants, Inc. (“Darden”), a holding company that owned a number of restaurants. The Investment Plan outlined Investment Firm A’s desire to separate one or more of Darden’s restaurant businesses to unlock additional value in the stock (the “Darden Inside Information”). DAVIS provided this information to WALTERS, who, on August 20 and 21, 2012, purchased 625,000 shares of Darden worth approximately $30 million.
On October 9, 2013, a national newspaper published an article about a significant investment in Darden by Investment Firm A, among others, with the intent to separate Darden into two companies. At the end of the trading day, Darden’s stock price had increased from $46.28 per share to $49.57, resulting in unrealized profits for WALTERS of approximately $1 million.
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WALTERS, 69, is charged with one count of conspiracy to commit securities fraud, four counts of securities fraud, one count of conspiracy to commit wire fraud, and four counts of wire fraud. Count One carries a maximum sentence of five years in prison. Counts Two through Ten each carry a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.
On May 16, 2016, DAVIS, 67, pled guilty before Judge Castel to one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, four counts of securities fraud, four counts of wire fraud, one count of obstruction of justice, and one count of perjury. Counts One and Twelve each carry a maximum sentence of five years in prison. Counts Two through Eleven each carry a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentences for the defendants will be determined by the judge.
Mr. Bharara praised the work of the FBI and the Postal Inspection Service, and thanked the SEC and the Financial Industry Regulatory Authority (“FINRA”) for their assistance. He also thanked the Las Vegas offices of the FBI and the Internal Revenue Service, Criminal Investigation Division.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brooke E. Cucinella and Daniel S. Goldman are in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
 As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.