The Week That Was, june 1, 2014

     The crackdown on corruption in China is going to claim a few golf courses. The National Development & Reform Commission has identified five illegally built golf courses in the People’s Republic, all of them built on farmland in Yunnan Province, Liaoning Province, the Ningxia Hui Autonomous Region, and metropolitan Beijing. Few details are available, but a course in southwestern Yunnan owned by a subsidiary of Agile Property Holdings appears to be among those deemed to be illegal. Global Times reports that one of the properties -- LaoHeWan Golf Club in suburban Beijing (Chaoyang District) -- has been “demolished,” and Reuters, citing a report by a Chinese news service, says that “all facilities on the illegal courses had been demolished and their owners fined heavily.” The penalties are being meted out by China’s Ministry of Land & Resources.

     Yet again, an unforeseen impediment is threatening to delay the construction of the golf venue for the 2016 Olympics. For unexplained reasons, a government official has demanded that the private-sector group building the Gil Hanse-designed course provide documents that prove it’s heeding all applicable environmental regulations in Rio de Janeiro. Hanse, who’s had to deal with such setbacks several times since he won the project’s $300,000 design commission, appears to have serious anxieties about what the latest delay might mean to the final product. “Going forward, we have to make sure we don’t all of a sudden start to rush the finish work,” he explained to the Associated Press. “Because ultimately, the details of the finished surface are what players are going to see. You need to lavish lots of time and attention on the details of the finished surfaces.” The government’s environmental concerns may have something to do with the ancillary development taking place adjacent to the course: The developers plan to build 160 residential units that will cost between $2.5 million and $7 million.

     Another major U.S. developer has soured on the golf business. Fayetteville, Arkansas-based Lindsey Management, an apartment developer that’s responsible for more than 40 affordably priced golf courses in eight Midwestern and southern states, believes that hiking trails now attract just as many renters. “There was a point in time where the golf course greased the skids,” company president Lyndy Lindsey told Arkansas Business. “I don’t think the golf course has quite the appeal now.” Lindsey says his company may still build a golf course here and there, but only when the market absolutely demands it. “We are looking at smaller sites,” he explained. “The tough thing about golf is, people are so busy it’s hard to find time to go play.”

     A Chinese-American group has purchased what’s said to be “the oldest golf course west of the Mississippi.” Konmer Venture LLC paid $2.1 million for Mare Island Golf Club, a venue in Vallejo, California whose original nine dates from 1892. Konmer’s four partners -- two of them Chinese nationals who’ve relocated to the San Francisco Bay area -- plan to add a hotel, a restaurant, and a banquet center adjacent to what has become an 18-hole, 6,150-yard track. “We like the demographics and the location,” one of the new owners told the Vallejo Times-Herald. “We want it to be a destination point.” Konmer bought Mare Island from Castle Linksters, an entity affiliated with a local home builder, Castle Companies. Castle, which has owned the property since 2003, put it on the market in 2011.

   This week it was revealed that two well-known personalities in our industry -- Phil Mickelson, the PGA Tour star, and Billy Walters, the most influential person in Las Vegas golf -- are being investigated in connection with alleged insider-trading schemes. Here are 10 things to know about the case:
     1. In the summer of 2011, a series of options purchases in Clorox stock raised red flags at the Securities & Exchange Commission. Why? Because the purchases took place just days before Carl Ichan, a notorious corporate raider, drove up the price of Clorox’s stock by announcing that he intended to take over the company. A group of investors, Mickelson and Walters among them, reportedly made “several million dollars” on their purchases.
     2. Here’s how the dots are connected: Ichan and Walters “struck up a friendship” years ago, according to the Wall Street Journal, and Walters and Mickelson “play golf together.” The Journal also says that Walters has occasionally “suggested stocks for Mr. Mickelson to consider buying.”
     3. The trades in Clorox were made nearly three years ago, and the government hasn’t yet accused anyone of committing a crime. That’s because it’s incredibly hard to compile evidence and prove an insider-trading case. Besides, Icahn may have been entirely within his legal rights if he’d wanted to share information about his plans for Clorox.
     4. The New York Times reports that the government is trying to “scare” Mickelson into cooperating with its investigation.
     5. Mickelson has professed his innocence. “I have done absolutely nothing wrong,” he said in a statement released by his lawyer. “I have cooperated with the government in this investigation and will continue to do so.”
     6. The federal probe isn’t limited to trading in Clorox’s stock. Walters and Mickelson (not Ichan) are also being investigated for stock purchases they made in Dean Foods in 2012. The New York Times reports that authorities are trying to determine if Walters had inside information about Dean Foods and shared it with Mickelson and others.
     7. Mickelson’s lawyer told the Wall Street Journal that his client “is not the target of any investigation. Period.” However, the Journal also noted that the FBI “declined to comment” on the statement.
     8. Mickelson and Walters aren’t the only people in golf whose trading has aroused suspicion. The Times reports that stock purchases in Clorox were also made by “at least one other investor connected to Mr. Walters and the golfing world.”
     9. Walters, who owns and/or manages three golf properties in Las Vegas, may be the government’s true target. Walters is a legendary sports bettor and an outstanding golfer, and he wields considerable power in the city’s political circles. Federal and state authorities have been trying to nail him for various alleged crimes -- illegal gambling, money laundering -- since the early 1990s but haven’t been able to bring a conviction.
     10. If the government files charges against anyone it’s investigating, it’s likely to win. Since August 2009, according to the Journal, federal prosecutors have accused 90 corporate executives, Wall Street traders, and other individuals of insider trading. So far, the government has won 85 convictions and guilty pleas. The other five cases are still pending.