It’s hard not to make Las Vegas gambler and developer Bill Walters a substantial underdog after his May in a federal insider trading investigation. He faces 10 charges related to alleged securities fraud.
But now he’s trying to shorten the odds by accusing federal law enforcement agents of committing misconduct by misleading a judge and leaking confidential grand jury information to the press.
Such accusations coming from defense attorneys are common and are usually disposed of in short order on the way to trial. In this instance, U.S. District Judge P. Kevin Castel thought enough of the motions before the court to order an evidentiary hearing on the matter. “On balance, a hearing on certain issues is warranted because of the temporal nexus between the May 23, 2014 statement in support of the wiretap renewal that agents were ‘not currently planning to approach the other TARGET SUBJECTS’ and the May 29 approaches to the targets by special agents …” the judge wrote in his Nov. 17 order. “Also, the newspaper articles in totality and in specifics are suggestive of a government leak,” including arguably protected subpoenas in a criminal investigation.
The judge set a Dec. 12 date for the evidentiary hearing. The case is being heard in the Southern District of New York. In his order, Castel made it clear he sees no evidence of misconduct to date and “need not focus on the scope of any remedial relief if misconduct were to be found.” That is to say, even if the procedure were exposed as technically inappropriate, he doesn’t have to sanction anyone. At least, not yet.
Even the defense “expressly disclaims suppression of wiretap evidence as requested relief.” In other words, don’t expect those wiretaps that make the relationship between Walters and former Dean Foods board member Thomas C. Davis to be tossed out soon. But now, we may be left to wonder, is there a little wiggle room?
Walters has evidence problems on several fronts in this case. For his part, his former friend Davis has already pleaded guilty to securities fraud and has agreed to cooperate against Walters.
The scheduled hearing, the judge said, will be limited to two areas. The first concerns the timing of the decision to have FBI agents approach two of the investigation’s targets on May 29, 2014, “including when travel arrangements were made for the approaches.” If agents wrote one thing in an affidavit and did another, they may have some explaining to do.
Intrepid reporters from The Wall Street Journal and The New York Times wrote articles the judge said were “suggestive of a government leak,” but it’s a stretch to think one story or a dozen changed the course of the investigation.
These might seem relatively trivial developments, and they may come to nothing as the case grinds forward. In the indictment, Walters is accused of devising a conspiracy that used coded language and untraceable cell phones in order to communicate with Davis at times the former board member now admits he was passing along sensitive corporate information the gambler used to buy and sell shares in the company from 2008 to 2014, reaping $32 million in profits and avoiding $11 million in losses.
In a previous statement to the press, Walters’ New York attorney, Barry Berke, has said the allegations contained in the indictment are “based on erroneous assumptions, speculative theories and false finger-pointing.”
At one point, Davis said under oath during his sentencing, he threw his cell into the water to attempt to keep it from FBI agents. “I did so with the intent both to impair the integrity of the cellular phone and to make it unavailable for any subsequent criminal proceeding,” he said.
There’s damning wiretap evidence and potentially devastating testimony from a key cooperating witness.
Whether an FBI agent inaccurately described the ongoing investigative strategy, or reporters from The Wall Street Journal and The New York Times received a heads up at a time when the case was being developed under a legal cloak of secrecy may not provide sufficient evidence of misconduct to warrant a substantial sanction in the case.
But it appears the door is open a crack.
John L. Smith is a longtime Las Vegas journalist and author. Contact him at jlnevadasmith@gmail.com. Follow him on Twitter at @jlnevadasmith.
