Last Friday at Jack Nicklaus’ Memorial tournament at Columbus, Ohio, the FBI (Federal Bureau of Investigation) intercepted PGA Tour professional golfer Phil Mickelson for questioning about their investigation of insider trading involving three people: Phil, billionaire activist investor Carl Icahn, and leading sports gambler William (“Billy”) Walters. It is about Mickelson and Williams purchasing stock in the year 2011 in two companies: Clorox and Dean Foods. The investigation is being conducted by the SEC and FBI. They previously had not divulged publicly about this ongoing, three-year investigation. Last Friday, after the FBI spoke to Mickelson, Icahn in an interview said he had not known about the investigation. That is very surprising to me, since he supposedly is the person who gave insider trading tips to Mickelson and Williams. This was a top news item last week, especially in the sports world.
Carl Icahn is a former stockbroker and now the majority shareholder of Icahn Enterprises, a diversified holding company. He is the leading U.S. activist in U.S. financial markets. He brings pressure against executives of various U.S. companies in order to affect what he thinks is positive change for those companies. He does it by buying stock in those companies and thereby gaining a controlling stockholder position. When the board of directors and executives of those companies don’t implement changes advocated by Mr. Icahn, he typically attempts a hostile takeover of those companies. He sometimes engineers a proxy fight in order to influence other stockholders. Activist market traders like Carl Icahn are controversial. Many people think he generally improves businesses, but others don’t think he does.
What surprises me is the manner in which the SEC (Securities and Exchange Commission) and/or the FBI (I suspect it was only the latter) decided to make this news story public–stopping Phil Mickelson while competing in a PGA Tour tournament in order to question him for what was reported as an hour of questioning. That smells fishy to me. Why didn’t the FBI contact Mickelson and arrange such a meeting with him in private when he was home and thus not working. Mickelson reportedly said that the FBI had questioned him previously about the matter and that this time he concluded with them by saying, “talk to lawyers.”In interviews during the tournament last week, Phil repeatedly said, “I’ve done nothing wrong.” Icahn says he doesn’t know Mickelson personally and thus has never spoken to him. Icahn may know Williams, since the two frequent Las Vegas because its the gambling capital of the world and Icahn has owned gaming casinos there in the past. It has been speculated that Icahn gave trading tips to Williamson and that he told Mickelson.
The main question is that if Icahn did give trading tips to either Williams or Mickelson, did Icahn break any SEC laws or rules about it? It appears that the only way he could have done so was by violating a fiduciary trust with his holding company. But we’ll have to wait and see what is actually going on.
I believe Mickelson, that he’s done nothing wrong. If Williams gave him information, and Mickelson didn’t know it came from Icahn, Mickelson did no wrong. Even if he knew it came from Icahn, Mickelson still may have been operating legally.
So, why did the FBI stop Mickelson for questioning while he was competing in a golf tournament, knowing full well that it would get into the media? To me that looks like harassment for the purpose of turning public opinion against a sports star. The SEC and FBI better have a pretty strong case against them. Insider trading violations are difficult to prove in court. And Phil Mickelson is one of the most beloved stars in American professional sports. Throughout the first decade of this century, he and Tiger Woods were the two top pro golfers in the world. Talk about trying to influence public opinion. I’m wondering if this investigation could backfire on the SEC and FBI.