January 14, 2017 / 12:00 AM / 6 months ago

Gambler says FBI leaks warrant insider trading case's dismissal

3 Min Read

File photo: Professional sports gambler William "Billy" Walters departs Federal Court after a hearing in Manhattan, New York City, New York, U.S., July 29, 2016.Andrew Kelly

NEW YORK (Reuters) - A famed Las Vegas sports bettor on Friday urged a federal judge to dismiss insider trading charges against him after an FBI agent admitted to leaking information to reporters about the investigation.

In a motion filed on Friday in Manhattan federal court, lawyers for gambler William "Billy" Walters contended the agent's leaks were part in illegal campaign to use secret grand jury information to revive a moribund investigation.

"Strategically leaking grand jury information that is by law required to be kept secret is the antithesis of how our government is allowed to investigate and try to build cases against its citizens," they wrote. "And yet that is exactly what happened here."

Walters' lawyers said the FBI used the leaks to obtain leads and revive a case that otherwise would not have been filed. The case could not have been the first time in which FBI agent David Chaves and his squad leaked information, the lawyers said.

Representatives for the FBI and Manhattan U.S. Attorney Preet Bharara's office, which is prosecuting the case, declined to comment. A lawyer for Chaves did not respond to a request for comment.

The motion came after prosecutors in December revealed that Chaves had admitted to being a "significant source" of information about the investigation in 2013 and 2014 for reporters at The Wall Street Journal and The New York Times.

Those newspapers published a series of reports beginning in 2014 about the investigation, two years before prosecutors in May brought insider trading charges against Walters, who has built a fortune as a sports bettor.

The leaks are now the subject of a criminal investigation by the Justice Department's Office of the Inspector General, prosecutors disclosed Dec. 21.

Chaves, an FBI coordinating supervisory special agent, oversaw the squad that conducted the investigation after being involved in numerous high-profile white collar cases.

Prosecutors said Walters made more than $40 million through insider trading on tips supplied by Thomas Davis, the Dean Foods Co's (DF.N) former chairman.

In a related civil case, the U.S. Securities and Exchange Commission said Phil Mickelson, who has won three Masters pro golf titles, at one point bought shares in Dean Foods on a recommendation by Walters.

Mickelson was not accused of wrongdoing, but he reached an agreement to pay back $1.03 million the SEC said he earned trading Dean Foods shares. Davis has pleaded guilty. Walters is scheduled to face trial on March 13.

The case is U.S. v. Davis et al, U.S. District Court, Southern District of New York, No. 16-cr-338.

Reporting by Nate Raymond in New York, editing by G Crosse

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