The Week That Was, may 22, 2016

     Thanks to a loophole in securities laws, Phil “the Gambler” Mickelson -- one of America’s wealthiest sports personalities and one of professional golf’s bona-fide superstars -- has avoided criminal prosecution in an insider-trading case that’s hung over his head for nearly two years. It’s often said that the true scandal of U.S. criminal justice isn’t what’s illegal but rather what’s legal, and Mickelson’s “investments” in Dean Foods serve as a case in point. Though the Securities & Exchange Commission has determined that he was “unjustly enriched,” with nearly $1 million in “ill-gotten gains,” his only punishment will be the financial equivalent of a slap on the wrist.
     Here are the gory details:
     -- Mickelson was part of a stock-trading scheme that involved Thomas Davis, the former chairman of Dean Foods, and Billy Walters, an infamous gambler and arguably the most influential person in Las Vegas’ golf scene. Beginning in 2008, the SEC alleges, Davis began providing inside information about Dean Foods to Walters, and over the next few years Walters used the knowledge to make roughly $40 million in profits on his “investments” in the company. Davis, who’s said to live “a country club lifestyle,” has admitted guilt and is cooperating in the government’s case against Walters, who’s been on the SEC’s hit list for years.
     -- Walters is said to be an outstanding amateur golfer, and he and Mickelson occasionally “play golf together,” according to the Wall Street Journal. As their relationship blossomed, Mickelson began to place bets with Walters. The gambles didn’t always pay off, however, and the SEC contends that Mickelson became indebted to Walters.
     -- In 2012, a time when Mickelson’s total stock holdings reportedly totaled $250,000, Walters encouraged Mickelson to buy some of Dean Foods’ stock. Within days, using three brokerage accounts, Mickelson purchased $2.4 million worth.
     -- Mickelson’s “investments” paid off in spades. He quickly turned a profit of $931,000 -- a return of nearly 39 percent -- and was, according to the SEC’s civil complaint, able to “pay off his debts with the proceeds of the trade.”
     -- The SEC can’t make a criminal charge stick against Mickelson because securities laws stipulate that people accused of insider trading must be fully aware that they’ve received information that isn’t available to the general public. In the Dean Foods case, Walters qualifies but Mickelson doesn’t. Therefore, Mickelson has been named as a “relief defendant,” a term that Fortune defines as “someone who is not accused of wrongdoing but has received ill-gotten gains as a result of others’ illegal acts.” The SEC apparently puts Mickelson’s actions in the category of “conduct that we think is nefarious and undermines fairness in the markets” but cannot be prosecuted. Pay attention: When it comes to securities laws, ignorance is bliss.
     -- So far, Mickelson’s participation in this sorry affair hasn’t cost him his place on the PGA Tour or any corporate endorsements. In fact, if nothing changes from here on out, his penalty for acting on advice from a long-time SEC target will amount to mere pocket change for someone who’s worth hundreds of millions of dollars. The SEC will require Mickelson to return the $931,000 that he made on his “investments” plus $105,000 in interest. And of course, he’ll have to pay his legal fees.
     -- According to his chief lawyer, in these proceedings Mickelson was merely “an innocent bystander.” And, in a statement that makes one wonder about the nature of corporate ethics, the lawyer contends that Mickelson “subscribes to the same values” as “the companies he represents,” a group that includes Callaway Golf, Exxon, Rolex, and KPMG. The companies may not agree.
     Regarding Mickelson’s involvement in the Dean Foods fiasco, a question lingers: If Mickelson’s debt to Walters amounted to less than $931,000, as the SEC’s complaint indicates, why didn’t Mickelson simply write a check to cover it? It certainly wasn’t because he doesn’t have the money. Heck, he put his hands on $2.4 million within days of getting Walters’ tip.
     Or, to put it another way: Why would a rich, famous, well-liked sports celebrity risk his reputation by acting on a recommendation from a gambler who’s repeatedly clashed with the SEC?
     It’s a question that only Mickelson can answer, and one that he almost certainly never will.

      Believe it or not, not all dinosaurs are extinct. A few of them can be found in East Lothian, Scotland, living among the Honourable Company of Edinburgh Golfers, and last week they ganged up to prevent Muirfield from admitting women as members. The R&A responded swiftly, removing the club from its place in the rotation for the Open Championship and serving notice to Royal Troon, which will soon take its own vote on whether to remain a men-only club. “The Open is one of the world’s great sporting events,” the R&A warned, “and going forward we will not stage the championship at a venue that does not admit women as members.” Muirfield’s attempt to break with 272 years of exclusionary tradition was derailed by a Just Say No campaign initiated by a relative handful of members (33 by actual count) who argued that women would be “likely over time to question our foursomes play, our match system, the uncompromising challenge our fine links present, our lunch arrangements.” The club’s attempt to open its doors to women fell short by 16 votes.

     Like Hulk Hogan, Dennis Rodman, Bobby Knight, John Daly, Curt Schilling, Lou Holtz, and other old-school sports celebrities, Jack Nicklaus has pledged his political allegiance to Donald Trump. “Donald’s terrific,” Nicklaus recently said, praising the presumptive nominee for “turning America upside down” and “awakening the country.” The money shot: “He’s a good man. And certainly, if he’s the one that’s on the ticket, I’ll be voting for him.” Nicklaus, a champion of conservative causes, last helped to make American great again by holding a fundraiser for Rick Scott, the Tea Party governor of Florida.

     Finally, a question apropos of nothing in particular: Whatever happened to Hack Golf?