Former Dean Foods Co. Chairman Tom Davis on Tuesday told jurors in Manhattan federal court that he passed insider information to Las Vegas sports gambler William “Bill” Walters using a cellphone the two called the “bat phone.”
Davis, who has pleaded guilty to insider trading charges and is cooperating with prosecutors, began testifying on the third day of Walters’ criminal insider trading trial.
Prosecutors say Walters was able to make more than $40 million thanks to tips from Davis, and that Walters passed insider information on to star golfer Phil Mickelson. Mickelson is not accused of wrongdoing.
Walters has pleaded not guilty. His lawyer, Barry Berke, told jurors last week that Walters never received any inside information, and that he made money trading stocks using the same skills that made him a successful sports gambler.
Davis, 68, told jurors on Tuesday during direct examination by Assistant U.S. Attorney Brooke Cucinella that Walters gave “very specific” instructions about how to use an assigned cellphone to talk about Dean Foods.
“We called it the bat phone,” Davis said.
Walters asked him to refer to the dairy processing company in those communications as “the Dallas Cowboys,” Davis testified.
Davis said the insider information he gave Walters included advance notice of Dean Foods’ 2012 spinoff of part of its business, including the Silk and Horizon Organic brands, as WhiteWave Foods Co.
Davis told jurors that when he was first visited by Federal Bureau of Investigation agents in 2014, he denied wrongdoing. After that, Davis said, he threw the bat phone in a creek near his home.
He said he continued to deny wrongdoing when questioned by the U.S. Securities and Exchange Commission in 2015, but decided to start cooperating with authorities after suffering a stroke in late 2015 that he said prompted him to reflect on his conduct.
Davis said that in subsequent meetings, prosecutors never pressured him to change his story.
“Simply put, they asked me to tell the truth,” he said.
Prosecutors say that in return for tips about Dean Foods, Walters made personal loans to Davis of almost $1 million.
Walters is also accused of making $1 million trading on a tip about Darden Restaurants Inc.