Everything you need to know to understand the insider trading investigation involving Carl Icahn, Phil Mickelson, and Billy Walters over suspicious trades of Clorox.
Brendan Mcdermid / Reuters / Reuters
When news broke late Friday that billionaire hedge fund titan Carl Icahn, professional golfer Phil Mickelson, and Las Vegas sports bettor Billy Walters were embroiled in an insider trading investigation involving both the Federal Bureau of Investigation and the Securities and Exchange Commission, it left many in the finance, sports, and legal worlds scratching their heads.
In the days since the investigation was leaked, its viability has been questioned and even flat-out dismissed as a "joke" in the media.
So just what constitutes insider trading, what are the standards of proof required for prosecution on a criminal and civil level, and what does this mean for this case? Here's a guide to understanding what's happened and what's ahead for all involved.
According to Michael Bachner, partner at the criminal defense law firm Bachner & Associates, insider trading at its most basic level means trading on information that has confidential material, and acquired in breach of a fiduciary duty or a promise of confidence to a particular audience.
"The information that you get had to be acquired by a way that is in breach of the fiduciary that you have," Bachner said. "It has to be nonpublic, it can be disseminated yet or taken into consideration by the market already, and then it has to be in breach of a duty to keep it quiet."
In the Icahn case, federal authorities are looking into whether Walters passed on information to Mickelson regarding shares of Clorox, with which Icahn was involved in a proxy fight at various points of time in 2011. In July of that year, Icahn made a $10.2 billion offer for the company, causing a jump in the price of the stock. Icahn and Walters were friends and had discussed stocks in the past.
"If Icahn had told Walters to buy something and Walters knew Icahn was involved in a deal or mergers and acquisitions deal with that company and he bought on that information," Bachner said. "That would be a crime because he is buying on that information."
Todd Sumlin/Charlotte Observer / MCT
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