Perhaps it’s too soon to use the gambling expression “all in” to describe the strategy of attorneys who are representing Las Vegas sports betting king Bill Walters in his increasingly bruising federal insider trading case, but it certainly looks like that expression does fit.
Walters’ defense last week dropped a punishing 73-page memorandum in support of its recent motion to dismiss a dozen charges which the gambler-developer faces, on the grounds of government misconduct. The memorandum argues that the FBI’s leaks to reporters of sensitive and confidential grand jury material have made a fair trial impossible.
In my experience, court filings generally follow the thicker-is-thinner rule: the thicker the filing, the thinner the evidence. In this case, however, Walters’ lead counsel Barry H. Berke finds himself at the decided advantage of already having an admission by a veteran FBI supervisor that, yes, he had indeed met with a reporter for The Wall Street Journal during a highly sensitive time in the investigation of Walters’ remarkably timely stock transactions involving Dean Foods and other publicly traded corporations. The FBI eventually secured the cooperation of former Dean Foods board chairman Thomas C. Davis. Berke argues that in-depth stories in the Journal and The New York Times included information leaked to reporters by the FBI and resulted in Davis cutting an extremely favorable deal with the prosecutors.
Berke leaves nothing to doubt in the memorandum: “The misconduct at issue here is significantly more flagrant, far-ranging and insidious than even we suspected when we first made this motion,” the attorney begins. “We now know that the shield of grand jury secrecy was turned upside down, and used instead as a sword in a systematic, deliberate, sustained, and illegal campaign by the government to leak and barter secret grand jury information as an investigative strategy to revive a moribund investigation. To carry out this criminal scheme, FBI Supervisory Special Agent (‘SSA’) David Chaves — the supervisor of the FBI’s New York white-collar squad — repeatedly and brazenly” violated the applicable federal rules of criminal procedure “and also appears to have committed multiple illegal acts, including the crime of obstruction of justice” … “and the unlawful disclosure of a sealed wiretap…. “It is difficult to imagine government misconduct more ‘outrageous,’ ‘deplorable’ or ‘reprehensible’ — all words that government actors in this cary case used to describe what was happening while it was happening.”
Berke piles outrage upon outrage in his attempt to build the argument that case is irreparably damaged by the actions of the veteran FBI supervisor. The lawyer calls it “truly extraordinary, and to our knowledge unprecedented.”
The potential leak of sensitive grand jury information is a serious matter, but it certainly wouldn’t be the first time the press was used to “tickle the wire” in an ongoing criminal case. Whether they include assistance from investigators or not, news articles often have the effect of getting subjects and targets in criminal investigations to start talking.
From the sound of things, Davis hasn’t stopped talking to authorities about his relationship with Walters. The two appeared to be friends and were occasional golf partners. They also had gambling in common, and multiple reports note that Davis was in debt to Walters at the time he allegedly violated his fiduciary responsibility to the company by sharing confidential information. That information enabled Walters to make millions on stock transactions while avoiding millions more in losses.
Walters has beaten three previous indictments, including one in the federal arena in the “Computer Group” sports betting case. It’s not his reputation that’s on the line.
Chaves and U.S. Attorney for the Southern District of New York Preet Bharara have plenty at stake. And Berke isn’t shy about reminding them of that fact.
“The record in this investigation demonstrates early an active interactions with the press at various levels of the FBI, with knowledge of the U.S. Attorney’s Office for the Southern District of New York (the ‘USAO’),” he writes. “It shows FBI knew back in May 2014 that it had one or more leakers in its ranks, and that the illegal leaking was for the purpose of furthering its investigation of Mr. Walters, but did essentially nothing to find out who was responsible or to put a stop to this criminal conduct. Equally troubling, substantial evidence and simple common sense lead to the conclusion that Mr. Walters’ case could not have been the first or only insider trading investigation in which SSA Chaves and his squad pursued this highly improper, illegal and criminal investigative strategy. Instead, it appears that illegal leaks of secret grand jury information became a standard and accepted investigative technique deployed in numerous cases.”
Then, a direct shot at the prosecution: “When Mr. Walters raised the issue of potential government leaks in his September 2016 motion to this Court, the USAO submitted papers that contained false statements and half-truths and aggressively and repeatedly denied what it knew had occurred.”
The legal process allows for a zealous defense, and Walters certainly appears to be receiving one. The lawyers are going all in. We’ll find out soon enough whether the strategy pays off.
John L. Smith is a longtime Las Vegas journalist and author. Contact him at jlnevadasmith@gmail.com, or on Twitter @jlnevadasmith.
