. ·,,_ UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK X INDICTMENT UNITED STATES OF AMERICA - v. - S1 16 Cr. 338 (PKC) WILLIAM T. WALTERS, a/k/a "Billy," Defendant. - - - - - - - - - - - - - - - X COUNT ONE (Conspiracy to.Commit Securities Fraud) The Grand Jury charges: Relevant Entities and Individuals 1. At 'all times relevant to this Indictment, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, was a sports bettor, businessman and investor, and served as the Chief Executive Officer and Chairman of the Board of Directors of The Walters Group, a holding company based in Las Vegas, Nevada that managed diversified investments and business ventures, including golf courses, real estate developments, and other investments. WALTERS was also the sole authorized trader for brokerage accounts in the name of The Walters Group and Nature Development B.V., an offshore entity that WALTERS controlled (the "WALTERS 1 Accounts") . 2. At all times relevant to this Indictment, Dean Foods Company ("Dean Foods" or the "Company") was one of the leading dairy companies in the United States with headquarters in Dallas, Texas. At all times relevant to this Indictment, Dean Foods.was a public company whose stock traded on the New York Stock Exchange ("NYSE") under the ticker symbol "DF." Dean Foods' written policies prohibited the unauthorized disclosure of Dean Foods' confidential information, including material, non-public information, which specifically included earnings information, business plans and forecasts, long-range strategic plans, and information related to pending litigation involving Dean Foods. 3. From at least in or about 2008 until in or about October 2012, WhiteWave-Alpro was a segment of Dean Foods that produced and distributed organic and other branded food and beverage products. On or about August 7, 2012, Dean Foods publicly announced that it intended to execute a spinoff of its WhiteWave-Alpro segment through The WhiteWave Foods Company (the "WhiteWave Spinoff"), a public company which was headquartered in Denver, Colorado ("WhiteWave"). On or about October 31, 2012, WhiteWave formally spun off from Dean Foods and, pursuant 2 to an Initial Public Offering ("IPO"), traded on the NYSE under the ticker symbol "WWAV." 4. At all times relevant to the Indictment, Darden Restaurants, Inc. ("Darden") owned and operated an assortment of restaurant brands throughout the United States. Headquartered in Orlando, Florida, Darden was a public company that traded on the NYSE under the ticker symbol "DRI." 5. At all times relevant to the Indictment, Thomas C. Davis ("Davis") was a member of the Board of Directors of Dean Foods (the "Board"), and from on or about May 1, 2013, until on or about August 7, 2015, Davis served as the NonExecutive Chairman of the Board. In his capacity as a member of the Board, Davis regularly received confi'dential information about Dean Foods' financial performance and results, contemplated and actual corporate transactions, and other significant corporate and strategic developments prior to Dean Foods' public announcements of such information (the "Inside Information"). As a director of Dean Foods, Davis had a fiduciary duty, among other obligations, to maintain the confidentiality of all of Dean Foods' confidential information, including the Inside Information. At various times, Davis reviewed and certified his understanding of his duties of trust 3 and confidence to Dean Foods. The Relationship Between WALTERS and Davis 6. Since in or about the mid-1990s, and at all times relevant to this Indictment, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, and Davis maintained a personal relationship and friendship founded on a shared interest in sports, golf, gambling and business. Beginning in at least 2007, WALTERS and Davis had numerous prospective and actual business dealings with each other, which included, among other things, the following: a. In or about 2007, WALTERS invited Davis to invest in, or assist with, WALTERS' venture to purchase a number of golf courses from another entity. Davis attempted to assist WALTERS, but ultimately Davis did not invest in this venture. b. In or about 2009, WALTERS asked Davis to help WALTERS enlist a Dallas-based bank to finance a golf course lease purchase that WALTERS was orchestrating. Davis introduced WALTERS to a Dallas bank, but WALTERS did not complete the transaction. c. In or about April 2010, at Davis's request, WALTERS arranged for another individual ("Individual-1") to provide Davis with a personal loan in the amount of $625,000 plus interest (the "April 2010 Loan"), which Individual-1 wired 4 to Davis on or about April 13, 2010, and which had a one-year term. In or about January 2012, WALTERS assumed responsibility for the balance of approximately $647,000 on the April 2010 Loan, after which time Davis did not make a payment of interest or principal until June 2014. d. In or about 2011, WALTERS and Davis together formed a limited liability corporation to invest in preferred shares of a software company (the "Software Company Investment"). WALTERS provided an initial capital contribution and received 80 percent of the profits, while Davis oversaw the Software Company Investment and received 20 percent of the profits. e. In or about 2011, Davis began an effort to recapitalize a Dallas-based bank (the "Bank Recapitalization"). Davis solicited WALTERS to invest in the Bank Recapitalization, and WALTERS tentatively agreed to invest approximately $2 million if Davis's effort was successful. In or about November 2011, WALTERS extended Davis a personal line of credit in the amount of $400,000, which was payable either in stock if the Bank Recapitalization was successful, or with interest if the Bank Recapitalization failed. Davis borrowed $350,000 from the line of credit (the "November 2011 Loan"). 5 In the end, the Bank Recapitalization failed, yet Davis never made a payment of interest or principal on the November 2011 Loan. f. In or about 2013, Davis entered into a consulting agreement with a Texas-based limited partnership that provided benefits administration services (the "Texas LP"), which was in need of financing. Davis solicited WALTERS to provide a letter of credit for $3 million in return for an equity stake of three percent in the Texas LP (the "Letter of Credit"). In or about November 2013, WALTERS agreed to provide the Letter of Credit through The Walters Group. In or about November 2014, the Letter of Credit expired, but WALTERS maintained his equity interest in the Texas LP. The Insider Trading Scheme Overview 7. From at least 2008 through in or about 2014, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, and Davis participated in a scheme in which Davis provided material, nonpublic information to WALTERS, who used that information to purchase and sell securities, all of which occurred in the WALTERS Accounts. 8. In furtherance of· the scheme, Davis obtained Inside Information through his role as a member of the Board, 6 including information related to Dean Foods' financial outlook and performance, earnings results, and the WhiteWave Spinoff. Davis provided Inside Information to WILLIAM T. WALTERS, a/k/a "Billy 1 11 the defendant 1 in violation of (i) fiduciary and other duties of trust and confidence owed by Davis to Dean Foods and its shareholders; Dean Foods; (ii) expectations of confidentiality held by (iii) written policies of Dean Foods regarding the use and safekeeping of confidential business information; and (iv) agreements between Dean Foods and Davis to maintain information in confidence. 9. WILLIAM T. WALTERS, a/k/a "Billy," the defendant 1 knowing that Davis had disclosed the Inside Information to him in violation of duties of trust and confidence/ used the Inside Information to execute profitable trades in Dean Foods stockr which earned WALTERS realized and unrealized profits of approximately $32 million and avoided losses of approximately $11 million. On certain trading days, WALTERS 1 purchases or sales based on Inside Information amounted to more than 30 percent of the total daily trading volume in Dean Foods stock. 10. In addition 1 Davis received material/ non-public information about·Darden (the "Darden Inside Information") from an investment firm in New York ("Investment Firm Au) which had 7 solicited Davis_ to become an investor in, or director of, Darden. Davis provided the Darden Inside Information to WILLIAM T. WALTERS, a/k/a "Billy," the defendant, in violation of (i) an ·agreement of confidentiality between Davis and Investment Firm A, and (ii) fiduciary and other duties of trust and confidence owed by Davis to Investment Firm A. 11. WILLIAM T. WALTERS, a/k/a "Billy," the defendant, knowing that Davis had disclosed the Darden Inside Information to him in violation of a duty of confidentiality, used the Infor~ation Darden Inside to execute profitable trades in Darden stock that earned WALTERS illegal profits of approximately $1 million. 12. In exchange for providing material, non-public information about Dean Foods and Darden to WILLIAM T. WALTERS, a/k/a "Billy,'~ the defendant, which WALTERS used to make profitable securities trades, Davis received significant benefits from WALTERS, including approximately $1 million in loans that were, in large measure, never repaid by Davis. WALTERS' Insider Trading in Dean Foods Dean Foods' April 30, 2008 Earnings Announcement 13. On or about April 30, 2008, prior to the open of the stock market, Dean Foods publicly announced its financial 8 results for the first quarter of 2008 and reported earnings that exceeded analysts' expectations (the "April 30, 2008 Earnings Announcement"). Davis, in his capacity as a member of the Board, possessed Inside Information concerning the Company's first quarter earnings before it was made public in the April 30, 2008 Earnings Announcement. 14. As set forth below, Davis provided Inside Information to WILLIAM T. WALTERS, a/k/a "Billy," the defendant, in advance of the April 30, 2008 Earnings Announcement. Specifically, in or about February 2008 and i'n or about March 2008, Davis provided WALTERS with Inside Information relating to, among other things, Dean Foods' internal full-year forecasts and quarterly financial results, which information WALTERS used to execute securities transactions in Dean Foods stock: a. On or about February 25, 2008, WALTERS and Davis spoke on the telephone for approximately 15 minutes. Less than 30 minutes after WALTERS and bavis concluded their conversation, WALTERS placed a telephone call to his Las Vegas, Nevada-based broker ("Broker-1") and purchased 200,000 shares of Dean Foods stock. By the end of the trading day on February 29, 2008, WALTERS had purchased approximately 1.7 million shares of Dean Foods stock. 9 b. On or about March 24, 2008, WALTERS called Davis and they spoke for approximately 10 minutes. Immediately after WALTERS disconnected from this call, WALTERS called Broker-1 and purchased 462,200 shares of Dean Foods stock. On or about March 25, 2008, WALTERS purchased an additional 50,000 shares of Dean Foods stock, increasing his total investment in Dean Foods stock to approximately 2.2 million shares. 15. After the April 30, 2008 Earnings Announcement, Dean Foods stock closed the trading day at $23.24 per share, up from $22.52 the previous day. As a result of trading on the Inside Information, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, earned realized and unrealized profits of approximately $2.6 million. Dean Foods' June 25, 2008 Guidance Announcement 16. On or about June 25, 2008, prior to the open of the stock market, Dean Foods publicly announced that it had raised its second quarter earnings guidance from 26 cents per share to 31 cents per share due to strong performance and cash flows (the "June 25, 2008 Guidance Announcement"). Davis, in his capacity as a member of the Board, possessed Inside Information concerning the Company's second quarter performance that led to the change in guidance before it was made public in 10 the June 25, 2008 Guidance Announcement. 17. As set forth below, in advance of the June 25, 2008 Guidance Announcement, Davis provided Inside Information to WILLIAM T. WALTERS, a/k/a "Billy," the defendant, including, among Other things, that Dean Foods' financial performance for the second quarter of 2008 was better than Wall Street's expectations, which information WALTERS used to execute securities transactions in Dean Foods stock: a. On or about June 18, 2008, Davis returned a telephone .call from WALTERS and they spoke for approximately seven minutes. b. Broker-1 four times. On·or about June 19, 2008, WALTERS called That day, WALTERS purchased approximately 1.9 million shares of Dean Foods stock. Later that day, after the market close, Davis returned another telephone call from WALTERS, and they spoke for approximately 15 minutes. c. On or about Friday, June 20 and Monday, June 23, 2008, WALTERS purchased additional shares of Dean Foods stock. In total, on the three trading days from June 19, 2008 through June 23, 2008, WALTERS purchased approximately 3.95 million shares of Dean Foods stock, which constituted between approximately 29 and 37 percent of the daily trading volume in 11 the stock on those days. 18. After the June 25, 2008 Guidance Announcement, Dean Foods' stock price closed the trading day at $20.12 per share, up from $18.39 the previous day. As a result of trading on the Inside Information, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, earned realized and unrealized profits of more than $6 million. Dean Foods' February 11, 2009 Earnings Announcement 19. On or about February 11, 2009, prior to the open of the stock market, Dean Foods publicly announced, among other things, its 2008 year-end financial results and fourth quarter earnings, which was the Company's most profitable quarter to date and which exceeded Wall Street's expectations (the "February 11, 2009 Earnings Announcement"). Davis, in his capacity as a member of the Board, possessed Inside Information concerning the Company's fourth quarter and year-end financial results before they were made public in the February 11, 2009 Earnings Announcement. 20. As set forth below, in advance of the February 11, 2009 Earnings Announcement, Davis provided Inside Information to WILLIAM T. WALTERS, a/k/a "Billy," the defendant. Specifically, at various times from in or about November 2008 12 until in or about February 2009, Davis informed WALTERS that, among other things, Davis remained positive about Dean Foods' financial results, notwithstanding market skepticism. WALTERS used this Inside Information to execute securities transactions in Dean Foods stock: a. On or about November 5, 2008, the day after Dean Foods publicly announced poor third quarter earnings results that prompted the stock to decline by approximately 20 percent, WALTERS placed a telephone call to Davis and they spoke for approximately five minutes. Immediately after disconnecting with Davis, WALTERS called Broker-1. On or about November 5 and 6, 2008, WALTERS purchased one million shares of Dean Foods stock. By the end of the trading day on or about November 12, 2008, WALTERS owned 1.5 million shares of Dean Foods stock. b. On or about February 10, 2009, the day before the February 11, 2009 Earnings Announcement; and following several calls between WALTERS and Davis in the preceding days, WALTERS purchased 300,000 shares of Dean Foods stock, which increased his total position in Dean Foods to 1.8 million shares. 21. Following the pre-market February 11, 2009 Earnings Announcement, Dean Foods stock closed the trading day 13 at $19.59 per share, up from $18.31 at the close of the previous day. As a result of trading on the Inside Information, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, earned realized and unrealized profits of approximately $5.5 million. Dean Foods' May 10, 2010 Earnings Announcement 22. On or about Monday, May 10, 2010, prior to the open of the stock market, Dean Foods publicly announced its financial results for the first quarter of 2010, which were below Wall Street's expectations, and the Company suspended full-year guidance (the "May 10, 2010 Earnings Announcement") Davis, in his capacity as a member of the Board, possessed Inside Information conqerning the Company's first quarter results and its decision to explore a potential spinoff of WhiteWave before certain of the Inside Information was made public in the May 10, 2010 Earnings Announcement. 23. As set forth below, in advance of the May 10, 2010 Earnings Announcement, Davis provided Inside Information to WILLIAM T. WALTERS, a/k/a "Billy," the defendant, including, among other things, that the Company was exploring strategic options related to WhiteWave, and that Dean Foods' 2010 first quarter earnings would not meet Wall Street's expectations. WALTERS used this Inside Information to execute and cause to be 14 executed securities transactions in Dean Foods stock: a. On or about Friday, April 9, 2010, WALTERS held a lunch meeting in Las Vegas, Nevada with Davis (the "April 9, 2010 Meeting"). At the April 9, 2010 Meeting, at Davis's request, WALTERS agreed to cause Individual-1 to provide Davis with a loan of $625,000 with interest. In return, Davis provided Inside Information about Dean Foods to WALTERS, including, among other things, that Dean Foods had engaged an investment bank to explore strategic possibilities to separate WhiteWave from Dean Foods and capture unrealized shareholder value. b. On or about Monday, April 12, 2010, the next business day following the April 9, 2010 Meeting, WALTERS purchased one million shares of Dean Foods stock, which constituted approximately 21 percent of the daily trading volume in the stock. On or about April 14 and 15, 2010, WALTERS purchased an additional 510,000 shares of Dean Foods stock. c. On or about April 15, 2010, WALTERS called Individual 1 and they spoke for approximately one minute. On or about April 16, 2010, Individual-1 purchased 1,000 shares of Dean Foods stock. d. On or about Sunday, May 2, 2010, Davis spoke 15 on the telephone with the Chief Executive Officer of Dean Foods (the "Dean Foods CEO"), who informed Davis that the Company's first quarter earnings had been poor. Later that day, Davis placed a telephone call to WALTERS and they spoke for approximately two minutes. e. On or about May 3 and 4, 2010, WALTERS sold the 1.51 million shares he had purchased after the April 9, 2010 Meeting. These sales constituted approximately 29 and 16 percent, respectively, of the daily trading volume in the stock on those days. f. On or about May 3, 2010, Individual-1 placed, and then cancelled, an order to sell the 1,000 shares of Dean Foods stock that Individual-1 had purchased on April 16, 2010. On or about May 6, 2010, Individual-1 sold the 1,000 shares of Dean Foods stock. 24. Following the pre-market May 10, 2010 Earnings Announcement, Dean Foods stock closed the trading day at $10.47 per share, down approximately 28 percent from the previous day's closing price of $14.63 per share. As a result of trading on the Inside Information, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, avoided losses of approximately $7.3 million. 25. From on or about May 10, 2010 until on or about 16 May 14, 2010, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, purchased 1.5 million shares of Dean Foods stock, reestablishing the position he had held following the April 9, 2010 Meeting at a reduction in cost basis of approximately $9.5 million. The November 9, 2010 Earnings Announcement 26. On or about November 9, 2010, prior to the open of the stock market, Dean Foods publicly announced its financial results for the third quarter of 2010, which failed to meet Wall Street's expectations, and also announced that the Company's CFO planned to resign (the "November 9, 2010 Earnings Announcement"). Davis, in his capacity as a member of the Board, possessed Inside Information ,concerning, among other things, the Company's third quarter earnings and the resignation of the CFO before that Inside Information was made public in the November 9, 2010 Earnings Announcement. 27. As set forth below, in advance of the November 9, 2010 Earnings Announcement, Davis provided Inside Information to WILLIAM T. WALTERS, a/k/a "Billy," the defendant, including, among other things, the Company's disappointing 2010 third quarter financial performance and the planned resignation of the Company's CFO. WALTERS used this Inside Information to execute 17 securities transactions in Dean Foods stock: a. On or about September 29, 2010, Davis called WALTERS and they spoke for approximately four minutes. On or about October 4 and 5, 2010, WALTERS purchased one million shares of Dean Foods stock. b. On or about October 6, 2010, Davis placed a telephone call to WALTERS and they spoke for approximately five minutes. On or about October 6 and 7, 2010, WALTERS purchased an additional 500,000 shares of Dean Foods stock. c. On or about October 21, 2010, Davis called WALTERS shortly before the market closed and they spoke for approximately three minutes. calls to Broker-1. WALTERS then placed two telephone Shortly thereafter, WALTERS placed several telephone calls to Davis, after which WALTERS placed another telephone call to Broker-1. On or about October 21 and 22, 2010, WALTERS sold all 1.5 million shares of Dean Foods stock that he had purchased approximately two weeks earlier, including a sale of 1.1 million shares on October 22, 2010, which constituted approximately 30 percent of the daily trading volume in the stock on that day. 28. Following the pre-market November 9, 2010 Earnings Announcement, Dean Foods stock closed the trading day 18 at $8.50 per share, down from $10.36 at the close of trading the previous day. As a result of trading on the Inside Information, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, avoided losses of approximately $2.2 million. Later that same day, on November 9, 2010, WALTERS purchased one million shares of Dean Foods, thereby reducing his cost basis for those shares by approximately $1.3 million. Dean Foods' May 9, 2012 Earnings Announcement 29. On or about May 9, 2012, prior to the opening of the stock market, Dean Foods publicly announced positive earnings for the first quarter of 2012. In addition, the Dean Foods CEO hosted a conference call at approximately 9:30 a.m. (the "May 9, 2012 Earnings Call"), during which the Dean Foods CEO reported the positive first quarter earnings and also stated that the Company was "mindful of the opportunity . to perhaps accrete value for our shareholder." 30. Prior to this announcement, Davis, in his capacity as a member of the Board, possessed Inside Information concerning the Company's first quarter earnings and its intention to pursue the WhiteWave Spinoff, certain of which Inside Information was made public in the May 9, 2012 Earnings Announcement. As set forth below, in advance of the May 9, 2012 19 Earnings Announcement, Davis provided Inside Information to WILLIAM T. WALTERS, a/k/ a "Billy, u the defendant, about, amon~--.,.!'' other things, the Company's f,irst quarter earnings and plans regarding the WhiteWave Spinoff. WALTERS used this Inside Information to execute securities transactions in Dean Foods stock: a. On or about May 8, 2012, Davis participated by telephone in a meeting of the Audit Committee of the Dean Foods Board that was followed immediately by a meeting of the full Dean Foods Board (the "May 8, 2012 Board Meetingu). During the May 8, 2012 Board.Meeting, the Board discussed the positive first quarter earnings, which, in addition to other favorable circumstances, resulted in the Company's decision to pursue a spinoff of WhiteWave. The Board further discussed the message the Dean Foods CEO would deliver to the market on the May 9, 2012 Earnings Call the following day. b. Almost immediately after disconnecting from the May 8, 2012 Board Meeting, Davis called WILLIAM T. WALTERS, a/k/a "Billy,u the defendant, and left a voicemail message. Approximately nine minutes later, WALTERS called a broker in New York, New York to whom WALTERS had transferred the WALTERS Accounts ("Broker-2ft). Shortly thereafter, Broker-2 entered an 20 order to purchase 1.5 million shares of Dean Foods stock in the WALTERS Accounts, of which only approximately 800,000 shares were purchased on May 8, 2012. On or about May 9, 2012, prior to the open of the stock market, WALTERS called Broker-2. Later that morning~ another approximately 400,000 shares of Dean Foods stock were purchased in the WALTERS Accounts. 31. Following the May 9, 2012 Earnings Call, Dean Foods stock ended the trading day at $14.15 per share, up from a share price of $12.72 at the close of trading on the previous day. As a result of trading on the Inside Information, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, earned unrealized profits of approximately $2.2 million. Dean Foods' August 7, 2012 Spinoff Announceme.nt 32. On or about August 7, 2012, after the close of the stock market, Dean Foods publicly announced that the Company had filed a registration statement with the United States Securities and Exchange Commission ("SEC") for an IPO of common stock of WhiteWave (the "August 7, 2012 Spinoff Announcement"). The August 7, 2012 Spinoff Announcement also stated that Dean Foods would own at least 80 percent of WhiteWave common stock following the IPO and that Dean Foods would distribute its future shares of WhiteWave to Dean Foods stockholders no later 21 than 180 days after the completion of the IPO. Prior to this announcement, and beginning in or about May 2012, Davis, in his capacity as a member of the Board, possessed Inside Information concerning the WhiteWave Spinoff before it was made public in the August 7, 2012 Spinoff Announcement. 33. In the months prior to the August 7, 2012 Spinoff Announcement, Davis provided Inside Information to WILLIAM T. WALTERS, a/k/a "Billy," the defendant, about, among other things, the approval by the Board to pursue the WhiteWave Spinoff, the structure and valuation of the WhiteWave Spinoff, the expected timing of the WhiteWave Spinoff announcement, and the likelihood of the WhiteWave Spinoff's occurrence. WALTERS used this Inside Information to execute and cause to be executed securities transactions in Dean Foods stock: a. On or about July 9, 2012, WALTERS called Davis and they spoke for approximately two minutes. On or about July 10, 2012, WALTERS and Davis exchanged text messages. On or about July 13, 2012, WALTERS placed four telephone calls to Davis. That day, WALTERS purchased 800,000 shares of Dean Foods stock. b. On or about July 16, 2012, after several attempts by WALTERS to speak with Davis, Davis returned WALTERS' 22 telephone call, and they spoke for more than two minutes. On or about July 17 and 18, 2012, WALTERS purcha.sed one million shares of Dean Foods stock. c. On or about Saturday, July 21, 2012, WALTERS called Davis and they spoke for approximately two minutes. On or about Monday, July 23 and Tuesday, July 24, 2012, WALTERS purchased an additional approximately 900,000 shares of Dean Foods. d. On or about July 30 and 31, 2012, Davis visited WALTERS in San Diego, California. During this visit, Davis confirmed to WALTERS that the WhiteWave Spinoff would be announced on August 7, 2012. On or about July 31, 2012, WALTERS purchased 100,000 shares of Dean Foods, increasing his total position in Dean Foods stock to approximately four million shares. 34. On or about Friday, July 27, 2012, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, placed a telephone call to an individual who owed a gambling debt to WALTERS ("Individual-2"). WALTERS and Individual-2 spoke for approximately one minute. WALTERS and Individual-2 spoke on the telephone twice more that day, and they exchanged text messages the following day, Saturday, July 28, 2012. 23 On or about Monday, July 30, 2012, WALTERS and Individual-2 exchanged additional text messages. On or about July 30 and 31, 2012, Individual-2 purchased approximately 240,000 shares of Dean Foods stock across three separate brokerage accounts. Individual-2 had never before traded in Dean Foods stock. 35. Following the August 7, 2012 Spinoff Announcement, Dean Foods' stock price increased by approximately 40 percent and closed the trading day on August 8, 2012 at $17.46 per share. As a result of trading on the Inside Information in May and July 2012, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, earned unrealized profits of approximately $17.1 million. 36. On or about August 8, 2012, Individual-2 sold all of Individual-2's Dean Foods shares for a profit of approximately $931,000. WhiteWave's October 17 37. 2012 stration Statement On or about October 17, 2012, prior to the open of the stock market, WhiteWave filed with the SEC an amended S-1 registration statement that, for the first time, publicly announced that the IPO would issue up to 23 million shares of WhiteWave common stock at a price range of $14 to $16 per share (the "October 17, 2012 Registration Statement"). 24 Davis, in his capacity as a member of the Board, possessed Inside Information concerning the WhiteWave IPO before it was made public in the October 17, 2012 Registration Statement, which Davis provided to WILLIAM T. WALTERS, a/k/a "Billy," the defendant, prior to October 17, 2012. WALTERS used this Inside Information to execute securities transactions in Dean Foods stock: a. On or about September 17, 18, and 19, 2012, WALTERS purchased 500,000 shares of Dean Foods stock. On or about October 9 and 11, 2012, WALTERS purchased an additional approximately 316,000 shares of Dean Foods stock. 38. Following the October 17, 2012 Registration Statement, Dean Foods stock price increased from $15.04 to $16.96 at the end of the trading day. As a result of trading on the Inside Information, WALTERS T. WALTERS, a/k/a "Billy," the defendant, earned unrealized profits of approximately $887,000. 39. On or about October 25, 2012, WhiteWave announced that the IPO would price its common stock at $17 per share, above its previously announced range of $14 to $16 per share. At the close of trading on October 25, 2012, the share price of Dean Foods rose to $18.79 per share. At that point, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, held more than 5.3 million shares of Dean Foods stock that was worth a total of approximately $100 million, at least $90.6 million of which WALTERS had purchased on the basis of Inside Information. Dean Foods' February 13, 2013 Announcement 40. On or about February 13, 2013, prior to the open of the stock market, Dean Foods publicly announced that the Company had lost a significant amount of business from one of its largest customers ("Customer-1") and adjusted guidance for 2013 accordingly (the "February 13, 2013 Announcement"). Davis, in his capacity as a member of the Board, possessed Inside Information concerning the loss of business from Customer-1 before it was made public in the February 13, 2013 Announcement, which Inside Information Davis provided to WILLIAM T. WALTERS, a/k/a "Billy," the defendant, prior to February 13, 2013. WALTERS used this Inside Information to execute securities trades in Dean Foods stock. For. example, on or about February 1, 2013, WALTERS sold approximately one million shares of Dean Foods, which constituted approximately 34 percent of daily trading volume in the stock. 41. Following the February 13, 2013 Announcement, Dean Foods stock closed the trading day at $16.70 per share, down from the previous day's closing price of $18.39 per share. By trading on the Inside Information, WILLIAM T. WALTERS, a/k/a 26 "Billy," the defendant, avoided losses of approximately $1.6 million. ' Sales of Dean Foods and WhiteWave Stock 42. On or about May 23, 2013, Dean Foods provided its shareholders with a dividend of WhiteWave stock (the "May 23 Dividend"). After selling approximately one million shares of Dean Foods stock on or about February 1, 2013, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, held the remainder of his approximately 4.3 million shares of Dean Foods stock through the May 23 Dividend, most of which were purchased using Inside Information, as set forth above. On or about May 24, 2013, WALTERS received a distribution of approximately 2,672,636 shares of WhiteWave stock, which were worth approximately $32 million. After the May 23 Dividend was complete, WALTERS' shares of Dean Foods stock were worth approximately $43 million. In or about July and August 2013, WALTERS sold all of his remaining shares of Dean Foods and WhiteWave stock. In total, as a result of selling his approximately 5.3 million shares of Dean Foods stock, WALTERS received gross proceeds of approximately $110 million. WALTERS' Insider Trading in Darden 43. On or about October 9, 2013, a national newspaper 27 ("Newspaper-1") published an article about a significant investment by Investment Firm A and other investors with the intent of pushing Darden to separate into two companies (the "October 9, 2013 Article"). In or about early August 2013, Davis received an investment plan related to Darden from Investment Firm A pursuant to a confidentiality agreement that Davis signed (the "Darden Investment Plan"). The Darden Investment Plan outlined Investment Firm A,s desire to separate, or spin off, one or more of Darden,s restaurant chains to unlock additional value in the stock. 44. After receiving the Darden Investment Plan and discussing it further with representatives of Investment Firm A, Davis provided the Darden Inside Information to WILLIAM T. WALTERS, a/k/a "Billy, 11 the defendant. On or about August 20 and 21, 2013, WALTERS used the Darden Inside Information to purchase approximately 625,000 shares of Darden at a total cost of approximately $30 million. 45. At the close of trading on October 9, 2013, Darden,s stock price closed at $49.57 per share, up from $46.28 per share at the close of trading the previous day. of tradin~ As a result on the Darden Inside Information, WILLIAM T. WALTERS, a/k/a "Billy," the.defendant, earned unrealized profits of 28 approximately $1 million. On or about December 19, 2013, WALTERS sold his shares of Darden stock for gross proceeds of approximately $1 million. WALTERS' Loans to Davis 46. During the course of the scheme charged herein, ' WILLIAM T. WALTERS, a/k/a "Billy," the defendant, provided two loans, the April 2010 Loan and the November 2011 Loan, to Davis totaling nearly $1 million. From in or about January 2012, when WALTERS assumed the April 2010 Loan from Individual-1, until June 2014, Davis did not make a single payment of interest or principal on either loan, nor did WALTERS ever request any payment from Davis. During this period of time, Davis repeatedly provided WALTERS with material, non-public information, which WALTERS used to make profitable securities trades, as set forth above. In June 2014, shortly after Newspaper-1 revealed the existence of a law enforcement investigation into WALTERS' timely purchases and sales of stock, Davis made his first payment to WALTERS on the loans. In June 2014, Davis owed approximately $1.1 million in principal and interest to WALTERS on the two loans. Means And Methods Of The Conspiracy 47. Among the means and methods by which WILLIAM T. 29 WALTERS, a/k/a "Billy," the defendant, Davis, and others known and unknown, would and did carry out the conspiracy were the following: a. WALTERS solicited and received Inside Information about Dean.Foods from Davis that WALTERS knew had been disclosed by Davis in breach of Davis's duty of confidentiality. WALTERS used the Inside Information to execute profitable trades in the securities of Dean Foods. b. WALTERS also solicited and received the Darden Inside Information from Davis that WALTERS knew had been disclosed by Davis in breach of Davis's duty of confidentiality. WALTERS used the Darden Inside Information to execute profitable trades in the securities of Darden. c. In order to receive the Inside Information about Dean Foods without detection by law enforcement authorities, WALTERS provided Davis with a prepaid cellular telephone for Davis to use when disclosing Inside Information to WALTERS. WALTERS further instructed Davis to use code words when discussing Inside Information with WALTERS. For example, WALTERS told Davis to use the phrase "Dallas Cowboys" to refer to Dean Foods. d. In exchange.for receiving material, non- 30 public information, WALTERS provided Davis with pecuniary benefits in the form of business opportunities, investment capital, and two loans that were never fully repaid. Statutory Allegations 48. From at least in or about 2008 through in or about 2014, in the Southern District of New York and elsewhere, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, Davis, and others known and unknown, willfully and knowingly did combine, conspire, confederate and agree together and with each other to commit an offense against the United States, to wit, securities fraud, in violation of Title 15, United States Code, Sections 78j (b) and 78ff, and Title 17, Code of Federal Regulations, Sections 240.10b5 and 240.10b5-2. 49. It was a part and object of the conspiracy that WILLIAM T. WALTERS, a/k/a "Billy," the defendant, Davis, and others known and unknown, willfully and knowingly, directly and. indirectly, by the use of means and instrumentalities of interstate commerce, and of the mails, and of facilities of national securities exchanges, would and did use and employ, in connection with the purchase and sale of securities, manipulative and deceptive devices and contrivances in violationof Title 17, Code of Federal Regulations, Sections 240.10b5 and 31 240.10b5-2, by: defraud; (a) employing devices, schemes and artifices to (b) making untrue statements of material fact and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices and courses of business which operated and would operate as a fraud and deceit upon persons, all in violation of Title 15, United States Code, Sections 78j (b) and 78ff. Overt Acts 50. In furtherance of the conspiracy and to effect the illegal object thereof, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, and his co-conspirators committed the following overt acts, among others, in the Southern District of New York and elsewhere: a. On or about April 9, 2010, WALTERS met with Davis in Las Vegas, Nevada, at which meeting WALTERS agreed to provide Davis with a loan of $625,000. At the same meeting, Davis provided WALTERS with Inside Information about Dean Foods. b. On or about May 8, 2012, WALTERS directed Broker-2, who was located in New York, New York, to purchase 1.5 million shares of Dean Foods stock for the WALTERS Accounts. c. On or about July 13, 2012, WALTERS directed 32 Broker-2, who was located in New York, New York, to purchase 800,000 shares of Dean Foods stock for the WALTERS Accounts. d. On or about July 30 and 31, 2012, Davis visited WALTERS in San Diego, California and stayed at WALTERS' home. During this visit, Davis provided WALTERS with Inside Information about Dean Foods. e. On or about September 17, 2012, WALTERS directed Broker-2, who was located in New York, New York, to· purchase 175,000 shares of Dean Foods for the WALTERS Accounts. f. On or about February 1, 2013, WALTERS directed Broker-2, who was located in New York, New York, to sell one million shares of Dean Foods. g. On or about August 20, 2013, WALTERS directed Broker-2, who was located in New York, New York, to purchase 535,200 shares of Darden. (Title 18, United States Code, Section 371.) COUNT TWO (Conspiracy to Commit Wire Fraud) The Grand Jury further charges: 51. The allegations contained in paragraphs 1 through 47 and 50 of this Indictment are hereby repeated, realleged, and incorporated by reference, as if fully set forth herein. 33 52. From at least in or about 2008 through in or about 2014, in the Southern District of New York and elsewhere, WILLIAM T. WALTERS, a/k/a "Billy,rr the defendant, Davis, and others known and unknown, willfully and knowingly, did combine, conspire, confederate, and agree together and with each other to commit wire fraud, in violation of Title 18, United States Code, Section 1343. 53. It was a part and an object of the conspiracy that WILLIAM T. WALTERS, a/k/a "Billy,,, the defendant, Davis, and others known and unknown, willfully and knowingly, having devised and intending to devise a scheme and artifice to defraud and for obtaining money and property by means of false and fraudulent pretenses, representations, and promises, would and did transmit and cause to be transmitted by means of wire, radio, and television communication in interstate and foreign commerce, writings, signs, signals, pictures, and sounds for the purpose of executing such scheme and artifice, in violation of Title 18, United States Code, Section 1343. (Title 18, United States Code, Section 1349.) 34 COUNTS THREE THROUGH SIX (Securities Fraud) The Grand Jury further charges: 54. The allegations contained in Paragraphs 1 through 47 and 50 are hereby repeated, realleged, and incorporated by reference, as if fully set forth herein. 55. On or about the dates set forth below, in the Southern District of New York and elsewhere, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, willfully and knowingly, directly and indirectly, by the use of means and instrumentalities of interstate commerce, and of the mails, and of facilities of national securities exchanges, did use and employ, in connection with the purchase and sale of securities, manipulative and deceptive devices and contrivances, in violation of Title 17, Code of Federal Regulations, Sections 240.10b5 and 240.10b5-2, by: (a) employing devices, schemes and artifices to defraud; (b) making, and causing others to make, untrue statements of material fact and omitting to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices and courses of business which operated and would operate as a fraud and deceit upon persons, 35 to wit, on the basis of material, non-public information that Davis disclosed to WALTERS in violation of Davis's fiduciary and other duties of trust and confidentiality, and in exchange for pecuniary benefits that WALTERS provided to Davis, WALTERS executed and caused to be executed the securities transactions listed below: Count Date Transaction 3 May 8 and 9, 2012 Purchase of approximately 1.2 million shares of Dean Foods 4 July 13, 17, 18, 23, 24 and 31, 2012 Purchase of approximately 2.8 million shares of Dean Foods 5 September 17, 18, 19, and October 9 and 11, 2012 Purchase of approximately 815,953 shares of Dean Foods 6 August 20 and 21, 2013 Purchase of approximately 625,000 shares of Darden (Title 15, United States Code, Sections 78j (b) & 78ff; Title 17, Code of Federal Regulations, Sections 240.10b5 and 240.10b5-2; and Title 18, United States Code, Section 2.) COUNTS SEVEN THROUGH TEN (Wire Fraud) The Grand Jury further charges: 56. The allegations contained in Paragraphs 1 through 47 and 50 are hereby repeated, realleged, and incorporated by 36 reference, as if fully set forth herein. 57. On or about the dates set forth below, in the Southern District of New York and elsewhere, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, willfully and knowingly, having devised and intending to devise a scheme and artifice to defraud, and for obtaining money and property by means of false and fraudulent pretenses, representations, and promises, transmitted and caused to be transmitted by means of wire, radio, and television communication in interstate and foreign commerce, writings, signs, signals, pictures, and sounds for the purpose of executing such scheme and artifice, to wit, through the use of interstate wires, including interstate and international telephone calls, WALTERS participated in a scheme to defraud Dean Foods, its shareholders, and Investment Firm A by using material, non-public information obtained from Davis, who owed fiduciary and other duties of trust and confidentiality to Dean Foods and Investment Firm A, to execute the securities transactions listed below: 37 Transaction Date Count 7 May 8 and 9, 2012 Purchase of approximately 1.2 million shares of Dean Foods 8 July 13, 17, 18, 23, 24 and 31, 2012 Purchase of approximately 2.8 million shares of Dean Foods .9 September 17, 18, 19, and October 9 and 11, 2012 Purchase of approximately 815,953 shares of Dean Foods 10 August 20 and 21, 2013 Purchase of approximately 625,000 shares of Darden (Title 18, United States Code, Sections 1343 and 2.) FORFEITURE ALLEGATION 58. As a result of committing one or more of the foregoing offenses alleged in Counts One through Ten of this Indictment, WILLIAM T. WALTERS, a/k/a "Billy," the defendant, shall forfeit to the United States, pursuant to Title 18, United States Code, Section 981(a) (1) (C), and Title 28, United States Code, Section 2461, any and all property, real and personal, that constitutes or is derived from proceeds traceable to the commission of the offenses alleged in Counts One through Ten of this Indictment. Substitute Assets Provision 59. If any of the above-described forfeitable 38 property, as a result of any act or omission of the defendant: a. cannot be located upon the exercise of due b. has been transferred or sold to, or deposited diligence; with, a third party; c. has been placed beyond the jurisdiction of d. has been substantially diminished in value; the court; or e. has been commingled with other property which cannot be divided without difficulty; it is the intent of the United States, pursuant to Title 21, United States Code, Section 853(p), to seek forfeiture of any other property of the defendant up to the value of the forfeitable property described above. (Title 18, United States Code, Sections 981; Title 21, United States Code, Section 853; and Title 28, United States Code, Section 2461.) PREET BHARARA United States Attorney FORE PERSON 39 Form No. USA-33s-274 (Ed. 9-25-58) UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK UNITED STATES OF AMERICA v. WILLIAM T. WALTERS, a/k/a "Billy," Defendant. INDICTMENT S1 16 Cr. 338 (PKC) u.s.c. §§ 2, 371, 981, 1343, 1349; 15 u.s.c. §§ 78j (b) & 78ff; 21 u.s.c. § 853; 28 u.s.c. § 2461; (18 17 CFR §§ 240.10b-5 & 240.10b5-2.) PREET BHARARA United States Attorney Foreperson