Federal investigators have launched what the Wall Street Journal is calling "a major insider-trading probe involving finance, gambling and sports" that involves the trading of activist investor Carl Icahn, pro golfer Phil Mickelson and Las Vegas bettor William "Billy" Walters.
According to a story published on the Journal website late Friday, the Federal Bureau of Investigation and the Securities and Exchange Commission are probing whether Mickelson and Walters illegally traded on nonpublic information they allegedly obtained from Icahn about his investments in public companies. The Journal story attributed the information to "people briefed on the probe."
The feds are investigating whether the past three years Icahn illegally provided Walters — well known in Vegas for his sports-betting abilities — about potentially market-moving investments by Icahn's company, Icahn Enterprises, the Journal story said.
Icahn and Walters are quoted in the article as denying any knowledge of a probe or declining comment.
"We do not know of any investigation," Mr. Icahn told the Journal Friday. "We are always very careful to observe all legal requirements in all of our activities." The suggestion that he was involved in improper trading, he said, was "inflammatory and speculative."
Mickelson is in Dublin, Ohio, playing The Memorial presented by Nationwide Insurance. He shot 70 on Friday to make the cut and was scheduled to tee off Saturday at 10:27 am ET.
Early Saturday, he released the following statement: "I have done absolutely nothing wrong. I have cooperated with the government in this investigation and will continue to do so. I wish I could fully discuss this matter, but under the current circumstances it's just not possible."
SEC spokesman John Nester declined to comment Saturday.
Citing anonymous sources, the Journal story said the government probe started three years ago after Icahn accumulated a 9.1% stake in Clorox in February 2011. "Well-timed trading around the time of his bid caught the attention of investigators, who began digging into the suspicious trading in Clorox stock, the people familiar with the probe said," according to the Journal article.
The activist investor's involvement with Clorox began in Feb. 11, 2011, when an SEC filing showed that Icahn Capital disclosed had taken a more than 9% stake in the Oakland-based company. Clorox shares closed up just over $5 at $71.26 that day on the news.
On July 15 Icahn offered to buy the company for $76.50 a share in a cash deal valued at an estimated $10.2 billion, according to an SEC filing. Clorox shares rose $6.12 that day and closed at $74.55.
But financial speculation swirled around Clorox four days earlier, when more than 16,000 call options changed hands. The most active were nearly 4,600 July call options at $70 that were due to expire the day Icahn announced the takeover effort. The volume represented a months-long high.
Call options allow an investor to buy shares at a set price by a specific date. Such transactions generally represent an investment bet that a company's stock will rise in value.
Icahn raised the proposed takeover price several times, ultimately offering $80 a share for Clorox on July 20. He also submitted a Jefferies Group letter indicating a proposal to raise $7.8 billion in financing for the deal.
He withdrew the Clorox offer and a proposed slate of directors on Sept. 23, announcing in an SEC filing that "a considerable base of shareholders" would not agree to support a takeover "at this time."
According to the Journal, "the investigators later expanded their probe to look at trading patterns by Walters and Mickelson relating to Dean Foods, said the people briefed on the probe.