You're listening to Bloomberg Law. I'm June Grasso with Michael Best. Las Vegas gambler Billy Walters is betting that a judge will dismiss insider trading charges against him. Walters, who's accused of making forty three million dollars by trading on leaks from an insider, now wants his case toss because of
leaks from an FBI agent. In announcing Walter's indictment in May, Manhattan U S Attorney Pret Berrara described a brazen scheme involving corporate intrigue, gambling debts, and secret codes where the former chairman of Dean Foods gave illegal stock tips to Walters. When the board member of a fortune company feeds inside information to a professional gambler who makes a killing on well time trades in that very company stock, that is
a form of corruption, corruption of our markets. The government's case is now in jeopardy because an FBI agent leaked details to the press about the confidential investigation of Walters and golf star Phil Mickelson, who paid back almost a million dollars from stock trades. Walter says the FBI violated his rights with leaks designed to revive an investigation that had stalled. My guests are former federal prosecutor Robert Mints, a partner McCarter in English, and Peter Henning, professor at
Wayne State University. Bob the FBI agent David Chavez has hired his own attorney as the case against him is investigated.
Tell us what he admitted he did and why. Short June, according to the United States Attorney's Office that was ordered by the judge to conduct an investigation into these leaking allegations, this veteran FBI supervisor admitted to leaking information about this insider trading investigation to reporters at both the Wall Street Journal and The New York Times, and the defense has alleged, as the basis for their motion to dispiss this indictment,
that these leaks were strategically timed and strategically released in order to try to influence the investigation and ultimately generate evidence that, but for the leaks, would never have been available to the government. Well, so Billy Walters is now Peter trying to get the case dismissed because of these leaks. Is there a legal basis for doing that? Well, he's
got two grounds to do with. The first ground is that the conduct by the agent, which the defense is claiming as a violation of the Gran Jury secrecy rule and perhaps even a couple of other statutes, that that generated evidence that the government got impermissibly and therefore that violated Walter's rights, that it violated the Green jury clause because the violations by the agent um ended up influencing
the grand jury's decision. The other is a broader claim of outrageous government conduct that, in effect, the Justice Department, both the prosecutors, and the FBI ought to be punished, if you will, for this type of improper action. That a defendant shouldn't be put on trial when the government violates the law itself. And so those are the two grounds. It's not an easy argument to make, but that's the basis on which he's trying to get these charges dismissed. Bob.
The defense motion papers say the misconduct here is significantly more flagrant, far ranging, and insidious than it expected. Is this level of conduct unprecedented? How would you describe it? Well, I wouldn't say it's unprecedented, but I would agree that it is highly unusual. In this case, the FBI agent has admitted to leaking information to these reporters on numerous occasions. He claims that the investigation was dormant at the time
and that's why he gave them the information. But the defense has argued that that is precisely the problem, that the investigation was going nowhere, and so the agent strategically leaked this information in order to try to generate new evidence. And they argue that there was a couple of things going on, Uh, We're behind this inappropriate leaking of information.
One was that they had a wire tap going and they were hoping that by leaking this information to the public that people who were under investigation might discuss their
criminal conduct on this wire tap. But probably their better argument is that one of the individuals he was under investigation, um, the former president of Dean Foods UM, as a result of this information coming out, took a cell phone that allegedly had information that would have implicated him UH and Billy Walters and threw that into a stream behind his
house and destroyed evidence. Once he destroyed that evidence, according to the defense, he had obstructed justice, and prosecutors used that as leverage to ultimately get him to recant his statements that he was innocent, to come back and agree to cooperate with the government and now become the key
witness against the defense is client in this case. Well, Peter, there's also some indication, isn't there that the higher ups in the Justice Department we're trying to prevent the league from happening or take some disciplinary action about the league, and might that be some mitigating factor here in the judges mind. Well, certainly that's what the Justice Department is going to argue that there's no reason to dismiss the charges. In other words, give Walters a free pass for conduct
that may well have constituted insider trading. He shouldn't get the charges dismissed. Instead, the Justice Department should be allowed to pursue the proper remedy, which is to discipline shab As and perhaps even pursue a criminal case against him. He could be charged with contemptive court, perhaps even obstruction of justice. What the Justice Department wants is essentially to say, these are two separate cases and um as bad as what Chavez did, that doesn't impact the government's case and
the evidence of insider trading against Walters. So I expect that will be the road the Justice Department goes down when it files its brief in the next week or two, Bob. Does the defendant have to show that the government's misconduct affected the case against him in some way or is the misconduct itself considered enough? Well? The defense here makes
essentially three different arguments. Under the leading Supreme Court case of Bank of Nova Scotia, the government the defense would have to show either that the misconduct substantially influenced the grand jury's decision to return an indictment, which is one
of their better arguments here. They also to argue that they're the history of prosecutorial misconduct here, in that they alleged that this particular FBI agent likely leaked information in a series of other cases, although their evidence on that is more speculative. And finally, they make the argument um that the government's conduct here was just so outrageous that it shocks the conscience and should be dismissed on those grounds.
But that's an exceedingly hard argument to make, and the one case where the government um failed to prevail on that, where the indictment was in fact dismissed, is one where an agent, for example, UH engage in sexual relations with the defendant in order to gather evidence. And that's the case where the court just said that the government just went too far to gather evidence and dismiss the indictment here.
I think their best argument is that they somehow allowed the government by leaking information to gather this information about this key cooperating witness who, as a result of the leaked information, allegedly destroyed that cell phone, and the government then used that as leverage to try to gain his cooperation.
The government's could argue that this defendant had plenty of other reasons to try to cooperate, that the weight of the evidence that was overwhelming, his cooperation was based on a series of factors, and that the fact that he destroyed his cell phone may have been only one of them. Peter, we only have about thirty seconds. But what do you think the judge is going to do? Well? This is
one tough call. Judge Castle is not happy and in fact invited the defense to file emotion to dismiss and so um I mean I I think the judge is going to give this very serious consideration. Um, if he does dismiss, I could certainly see the Justice Department appealing it to the Second Circuit, and so this is going to be a very close call. Bob, do you in fifteen seconds do you want to agree with Peter or contradict him? No, I agree. These are usually the arguments
that the defense makes. I wouldn't say routinely, but it's not unusual. This is one of the closer calls, and the judge could really go either way here. It's going to be fascinating to see. Thank you both for being on Bloomberg Law. That's Robert Mint's a partner mcarter in English, and Peter Henning, a professor at Wayne State University.