Golfer Phil Mickelson and Las Vegas gambler Billy Walters made several million dollars in 2011 trading call options in shares of Clorox days before billionaire Carl Icahn announced an unsolicited bid for the company. Almost three years later, the FBI confronted Mickelson at a tournament in Ohio last week in an attempt to gain more information. There have been no official accusations, and Mickelson and Icahn both deny knowing the other. Further, Icahn owns a substantial stake in one of the companies that would have been used to tap the hedge fund legend’s phone calls.

Mickelson says he is fully cooperating with the investigation and denies any wrongdoing. Icahn has loudly defended his “unblemished” 50 year record, having never been caught or officially accused of breaking any laws. Walters too denies any wrongdoing.

Legal experts believe that it will be difficult for federal prosecutors to prove that the three actually violated securities law. John Coffee, professor of securities law at Columbia Law School, does not think “the FBI has a clear and coherent legal theory of what has been done wrong that would violate insider trading laws.”

In July 2011, Icahn sent a letter to the CEO of Clorox offering to take the company private in a deal worth $12.6 billion. This news caused Clorox’s stock to spike, and anyone who knew about the announcement ahead of time could have bought Clorox stock in advance and sold it for a profit after the spike. This, however, is not in and of itself a violation as neither Icahn, Mickelson, nor Walters had a legal obligation to act in the interest of Clorox shareholders and thus could not have breached any fiduciary duty. The fact that Icahn sent a letter to Clorox instead of making an official tender offer is also important as rules governing these offers are more stringent.

With regard to Mickelson, the government would have to prove that he knew he was receiving information from an inside source, but even if Walters gave Mickelson a stock tip, that does not prove that Mickelson knew he was using material, non-public information. The investigation will continue, but as of now the case is tenuous at best.

If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.