So the feds, with all the investigative resources financed by the American taxpayer at their disposal, are out protecting the investing public from . . . Phil Mickelson.
The Securities and Exchange Commission and the FBI got some nice headlines out of leaking an investigation into whether the golfing great bought shares of the company Clorox based on inside information. The feds even sent two FBI agents to harass Mickelson at the golf course last week.
See? They are cracking down on fat-cat bad guys.
Except that this case appears to be going nowhere past those headlines, based on what the feds say they have.
In fact, by wasting time and resources on this puny little matter, the Keystone Kops in charge of protecting our markets are showing how out of touch they are about what matters to most investors.
More than five years after the financial crisis — a scandal that netted no major culprits but imposed vast hardship on the American people — here’s what our federal watchdogs think might be a crime: Three years ago, after investor Carl Icahn bought a stake in Clorox but before he announced he wanted to take the company over, investigators spotted some unusual buying activity.
At issue is whether Icahn tipped a friend, well-known sports better Billy Walters, who may have tipped Mickelson. All three men have said they did nothing wrong.
More important: The facts as described appear perfectly legal, according to every securities attorney I spoke to.
The insider-trading laws are mostly company-specific — they deal with “misappropriating” or stealing information from a public company or its shareholders and then trading on it.
The rules for activist investors such as Icahn are far more cloudy.
It might, for example, not be kosher if Icahn had told Walters he was about to take the official step of launching a so-called tender offer for the company — a notice to all investors that he is willing to buy their shares at a set price.
But just saying he’d be announcing a plain old bid for the company appears to fall within the law.
Even if it didn’t, the feds would also have to show that Icahn somehow received a benefit from Walters — a necessary ingredient for most insider-trading charges.
Sorry: Icahn is a billionaire several times over, so it’s hard to see how Walters could’ve paid him off. (Blackjack tips, maybe?)
Absent more damaging information, this case is going nowhere.
So what is the government up to? We can only guess, but from my experience covering white-collar law enforcement over the past two decades, it looks like a publicity stunt.
The Justice Department and the SEC failed to see the 2008 crisis coming and for years overlooked Bernie Madoff’s Ponzi scheme, even ignoring loud warnings about the scam. Their ramp-up in bringing insider-trading cases in recent years looks like an effort to shake that “clueless and toothless” rep.
Then, too, the history of insider-trading enforcement is one of gradual overreach to stretch what the law covers.
Maybe the feds hope to use this case as a way to equate activists like Icahn sharing their intentions with friends who trade on it with the very illegal act of stealing information from a corporation and then trading on it.
Or maybe the feds just don’t like the outspoken Icahn, who’s been making headlines (and lots of money) embarrassing large corporations he believes don’t act in the best interest of shareholders.
And if the Obama IRS has no problem targeting conservative lobby groups, it’s no stretch to imagine the Obama Justice Department and SEC targeting Mickelson after he recently vented against high taxes — one of the hallmarks of Obamanomics.
Or perhaps the real target is Walters, a well-known gambler who has escaped indictment in the past.
But who cares? With the Federal Reserve priming the stock market with easy money these last five years, the easiest way to cash in was to invest in the stock market via a low-cost index fund.
And the easiest way to know when to get out is when the Fed signals it will stop printing money — and you don’t need an insider tip for that.
In the wacky world we live in, it’s easier for the feds to show up on a golf course to scare Phil Mickelson into ratting out people who may or may not have broken the law than it is to go after less sexy crimes like brokers selling crummy mutual funds to unsuspecting clients.
But how many headlines would that generate?
Charles Gasparino is a Fox Business Network senior correspondent.