Celebrity Testimony Expected at Walters Trial (Audio)

from Tom Davis, the former chairman of Dean Foods. Walters allegedly passed on those tips to Phil Mickelson, a three time Masters tournament winner. Here's how former Manhattan US Attorney Prett Barrara described the case. When the board member of a fortune company feeds inside information to a professional gambler who makes a killing on well timed trades in that very company stock, that is a form of corruption, corruption

of our markets. Nicholson was not charged, but paid back the almost one million dollars he made on Dean Food trades. Our guests are John Coffee, Professor, Columbia University, Law School and Adam Pritchard, Professor at the University of Michigan Law School. John Tom Javis has pleaded guilty and is expected to be the prosecution star witness. And this is a pretty straight case tipper to tippy with no middleman. How strong is the prosecution's case, Oh, I think comparatively it's very strong,

for for three reasons. First of all, you've got the direct testimony of the tipper implicating the tippy. In many of these cases, the government only has circumstantial evidence. For example, in the famous case involving the Goldman Sacks director Mr Gupta, all they knew is that there was a phone call between the tipper and the tippy. They were close friends, and the tippy traded seconds later. That's circumstantial. Here you got this is the second point, that the tipper didn't

trade himself. He's pled guilty to a found it. The only reason he would have to do that is that there was illi al least surrounding his tip to Mr waller Um if he didn't think that was guilty. This is not like a case where he's committed a half dozen defenses offenses and is trying to find one to settle on. Finally, Mr Waller is a professional gambler. If the jury learns that, I think the jury is likely to believe this guy is very comfortable taking risk, and here,

at this time he took a legal risk. Okay, that sums it all up. Plus the fact that the US government, the Department Justice, has not lost an insider trading trial in the Southern District in modern memory, they're very good at commencing juries, at least in Manhattan, that insider traders

broke the law. Adam, do you agree that the prosecution has an especially strong case here, and if so, does that mean that Billy Walters probably has to testify in his own defense in order to have a fighting chance. So this is a classic insider trading scenario. H Davis and Walters are are golfing buddies and Davis was passing on the information. I agree with Jack that having the testimony of the the tipper makes the government's case very strong.

I expect that the defense lawyers are going to try and uh muddy the waters, try and beat up Davis on the stand for having taken a plea uh in exchange for his testimony, and they're going to make an assessment of how credible Davis is on the stand before making the decision about whether or not they're going to let their client testify. Uh. He has a history of running a foul the law on occasion, and the history of being a gambler suggests that he is a risk taker.

Maybe the defense would prefer to keep him off the stand if they can, but they may have to uh throw hail Mary if Davis comes off as a credible witness Jack. How often do defendants actually help themselves when they testify, Well, we've seen very few defendants succeed at trials recently. The one case I can think of, which was a civil case, involved a famous basketball owner out there, Mr Cuban, out there in Texas, and there I think the jury was very sympathetic to him because he was

a local hero a ler. Than that, the norm is the defendant doesn't take the stand because not only does he possibly get committed inside of trading, but there could be a follow up prosecution for perjury, and many judges will add to the sins if they think the defendant log Adam, do you mentioned earlier that there are allegations

of FBI misconduct here? The trial judges said, the defense may ask about FBI leaks about the investigation to two newspapers, how often all would you see that affecting the case? So the defense strategy has to be that they want to show that this is a case of government overreaching and that the government was trying to try its case through the news. And if the goal is to muddy the waters, then showing misconduct by the FBI agent is a strategy that has a good deal of appeal. That

doesn't involve putting Walters on the stand. It's putting the government on the stand to some extent, showing that they were pushing the boundaries. Jack about a minute. Here, there are some clues in the defense papers that they may use the argument that Walters did the research into his stock picks and he was very good at it. How convincing is that usually? Um, it could possibly work in some cases. But here, if you know he's speaking to the chairman, why do you want to do fundamental research

into the company's financial statements? If the chairman is telling you where the stocks going the next couple of days, and he traded frequently between two thousand and eight and two thousand and fourteen, If he was just a fundamental trader, would be a buy and whole trader. He doesn't seem to have been there. We've been talking about the highest

profile insider trading case in years. Yesterday, jury selection started in the trial of Las Vegas legend as a legendary sports gambler, Billy Walters, who was accused of making forty three million dollars on inside tips from Tom Davis, the

former chairman of Dean Foods. And we've been speaking with John Coffey, professor at Columbia University Law School, and Adam Pritchard, professor at the University of Michigan Law School, Jack Golfer, Phil Mickelson's name is on the list of about fifty potential witnesses, and the judge yesterday question the jurors to see if they would be star struck, and he dismissed

a female. You were saying, the look of rapture on her face at the mention of his name and her repeatedly saying it wouldn't influence her is enough for me. Tell us how a judge makes a decision to dismiss a jury. Is it a gut feeling? Oh? I think it is a somewhat intuitive feeling the judge wants to see the jury. They managed to see the jury, Yester, he didn't take long and he just felt that one person might be a little too close and beholding to

a possible star witness. If Mr Michelson does testify, it will be devastating and all likelihood for Mr Waller because now they'll have him straddle at both ends with cooperating witnesses saying that the information came from Davis and that Davis passed on to Michelson, and that's going to be a very strong impact with a jury. Adam, this is a case that was brought under preperaum in the Southern District of New York. Um. He's now now out of

a job there. Do you think that's going to affect this case at all or is it something that the career prosecutors can just handle on their own. Barra was not going to be in the courtroom presenting witnesses or providing the argument. This is something that the line prosecutors would have been responsible before four and will be responsible

for as the trial unfold. So very strong commitment to professionalism among the prosecutors who work in the Southern District of New York, and I'm sure that they're going to be ready to try this case, and I would be very surprised if Berra's firing had any effect on the outcome. Jack. So the jury was picked. It was seven women and five men. They're going to return tomorrow morning to pick the alternates and then the trial will begin. Some lawyers

say that cases one or lost in jury selection. Do you agree with that, and especially in this case, I think it can be lost. But remember, we've seen an awful lot of insider trading trials in the Southern District of New York and the government hasn't lost warm. So it's not that hard to win this kind of case, and they're stronger than normal evidence here, Adam. One name we we haven't talked about is Carl Icon, who UH

is also a potential witness in the case. Can you just tell us a little bit about his potential connection to this trial. So the Icon connection is based on trading that Walters had in Clorox, which apparently prompted the investigation into UH Walters, and the information would have been

conveyed through UH Davis. But the main allegations are relating to Dean Foods, the company for which Tom Davis was the chairman, and Darden Restaurants, where he was involved with an investor group that was uh contemp lading, mounting an activist campaign. So Icon's connection to the case that's going to be presented, uh seems pretty peripheral. And yeah, we have again we have about a minute Jack. How important

are these insider trading cases? Was it pre Barra's emphasis on them that that lad to have so many in New York? Or are they important enough? And well, of course he has jurisdiction over Wall Street and over the trading firms, and any trade that goes across the New York's doctors change is within his jurisdiction. I think we had a lot of them because he found networks and he very rigorously and systematically followed the network. It's like pulling on a PC yarn and eventually the whole sweater

unravels and he got all of those people. This case is important for a number of reasons. It's actually going to significantly change FBI and prosecutorial behavior because the judge was very upset, very angry with the leaking that the FBI agents did to the major media, including the Times, in the Wall Street Journal, and until two weeks ago, we didn't know what he was going to dismiss the

case because of that misconduct. He has instead ruled that the government should pursue and investigate and possibly prosecute the FBI agent. And I think that means for the future, the FBI isn't going to be quite as free and easy sharing their files with the major media. So that's a change right there. Well, we look forward to talking

to you both again as this trial progresses. That's John Coffee, Professor Columbia University Law School and Adam Pritchard, Professor of the University of Michigan Law School.