Golfer Phil Mickelson will repay $931K he made from insider trading in 2012

American golfer Phil Mickelson must repay $931,000 US he made from insider trading on stock in a company called Dean Foods in 2012.

The PGA golfer was named as a relief defendant in a case against William (Billy) Walters and Thomas Davis.

Walters is a prominent sports gambler who has made millions over the years betting on the outcomes of pro sports. Davis is a former chairman of Dean Foods who stepped down last year amid allegations that he had been feeding information to Walters in exchange for money.

Under U.S. law, a relief defendant is not accused of wrongdoing but has received "ill-gotten gains" as a result of others' illegal acts, but they are required to "disgorge ill-gotten gains and to pay prejudgment interest thereon," the lawsuit reads.

That means Mickelson isn't facing jail time, but must repay the money to the Securities and Exchange Commission (SEC).

Suspicious trades in 2012

The SEC contends that Davis had been giving Walters information about his company and others for several years, so that Walters and others could profit from the information. The SEC also says Walters obtained insider information about Darden Restaurants Inc. from Davis. 

In one instance in 2012, Davis is alleged to have given Walters insider information about an upcoming deal to spin off a Dean Foods subsidiary called WhiteWave, in addition to advanced knowledge of the company's upcoming second-quarter earnings, which had yet to be released that July. Walters is alleged to have then given information to Mickelson — who owed money to Walters at the time — telling him to invest in Dean Foods stock.

Mickelson did, buying  200,240 shares worth about $2.4 million, and held them for about a week. The stock surged 40 per cent when the news came out, netting Mickelson a profit of $931,000.

The amount Mickelson invested was exponentially larger than all of the rest of his investments combined, which were worth about $250,000 at the time.

"Mickelson had not been a frequent trader and these were his first-ever Dean Foods purchases," the SEC says. "Mickelson had placed bets with Walters prior to the tip, and Mickelson owed Walters money at the time of the Dean Foods trading. Mickelson repaid Walters in September 2012, in part with the proceeds of his trading."

His lawyers said Mickelson was "an innocent bystander" and in a statement one of them said the golfer feels vindicated that he was not charged. He said Mickelson also takes full responsibility for "the decisions and associations that led him to becoming part of this investigation."

Walters made $17 million in other trades related to Dean Foods stock in and around the same time.

Mickelson was not in the field of the Byron Nelson Classic in Irving, Texas, where play began Thursday morning. He has earned almost $80 million US in prize money during his golf career, and several million more from endorsements over the years.