In the summer of 2011, a series of winning stock trades raised immediate red flags for financial regulators.
The traders — a cross-section of investors including the championship golfer Phil Mickelson and the high-rolling gambler and golf course owner William T. Walters — collectively reaped several million dollars, according to people briefed on the matter who spoke anonymously because they were not authorized to discuss the investigation.
The trades, some of which were options contracts to buy Clorox stock, came just days before the billionaire investor Carl C. Icahn announced an unsolicited takeover bid for the company that drove up the stock price. And trading records indicated that the bets came not just from Mr. Walters but also from at least one other investor connected to the golfing world, one of the people briefed on the matter said. That investor, another person said, is not now under investigation.
The previously unreported details about the size and scope of the trading, emerging a day after a federal insider trading investigation first came to light, might seem to stack up in the government’s favor. As federal authorities examine whether Mr. Icahn leaked details of his Clorox bid to Mr. Walters, the people said, they are exploring a theory that Mr. Walters might have separately passed on other information to Mr. Mickelson.
And yet, nearly three years after the trades flashed some telltale signs of possible insider trading, a case has yet to materialize.
A recounting of the government’s tactics, described in interviews with people briefed on the matter, provides a case study in the hurdles of building an insider trading investigation. Even after the United States attorney’s office in Manhattan racked up a perfect record under Preet Bharara — more than 80 insider trading convictions and no defeats — a case can wither without a smoking-gun email, a loose-lipped cooperating witness or wiretapped conversations.
In the case of Clorox, the authorities initially planned to secure cooperation from one of Mr. Icahn’s top employees, the people briefed on the matter said, but shifted gears when they lacked the leverage to do so.
The focus then turned to Mr. Mickelson, whom authorities hoped to scare into cooperating. As one of America’s most popular athletes, Mr. Mickelson had much to lose under the glare of the government’s spotlight.
But when the F.B.I. approached Mr. Mickelson — first pulling him off a plane at Teterboro Airport in New Jersey last year, the people said, and then confronting him on Thursday at a golf tournament in Ohio — Mr. Mickelson had little to offer. In the airport discussion last year, which lasted no more than an hour, the people said, Mr. Mickelson pledged to cooperate but explained that he did not know Mr. Icahn and had no clue that the stock tips might have been improper. On Thursday, Mr. Mickelson said, he instructed F.B.I. agents to “speak to my lawyers.”
Mr. Mickelson, Mr. Walters and Mr. Icahn have not been accused of any wrongdoing. Even if Mr. Icahn did leak secret information about his firm’s intentions with Clorox, he may have done so legally. It would have been illegal if he breached a duty of confidentiality to his own investors.
Through his agent, Mr. Mickelson released a statement saying that he had “done absolutely nothing wrong.” At the golf tournament on Saturday, Mr. Mickelson said, “I’m really not going to say anything more until sometime in the near future,” adding that “I’ll cooperate as much as I can with the F.B.I.”
In an interview, Mr. Icahn said “I don’t give out inside information,” adding that “for 50 years I have had an unblemished record.” Mr. Icahn argued that any suggestion he had done anything wrong was “irresponsible.”
Mr. Walters, reached on Friday evening, said, “While I don’t have any comment, pal, I’ll talk to you later.”
The insider trading investigation is not the first time that Mr. Walters, often considered the most successful sports bettor in the country, has drawn federal scrutiny. In 1992, he was acquitted of illegal gambling charges. Since then, the Nevada attorney general has charged Mr. Walters with money laundering stemming from his gambling operation, but courts dismissed that case.
Now Mr. Walters, better known as Billy, is at the center of the insider trading investigation.
A year after the 2011 Clorox trades, Mr. Walters and Mr. Mickelson placed trades in Dean Foods, the people briefed on the matter said, just before the food and beverage company announced its quarterly earnings and a public stock offering for a subsidiary. The authorities, who have not found any connection between Mr. Icahn and the Dean Foods trading, are investigating whether Mr. Walters had a source inside the company itself.
Mr. Icahn, a frequent visitor to Las Vegas with a number of business interests there, acknowledges knowing Mr. Walters but says he has no connection to Mr. Mickelson. Mr. Walters, for his part, has crossed paths with Mr. Mickelson at golf tournaments.
“With this breaking in the media, the government’s next step will likely be sending out grand jury subpoenas to the parties for all documents, emails and text messages,” said Reed Brodsky, a partner with Gibson Dunn & Crutcher and a former federal prosecutor.
In recent months, authorities have pored over phone records, the people briefed on the matter said, seeking to line up Mr. Icahn’s calls to Mr. Walters with the trading in Clorox. But phone records provide only circumstantial leads.
A relentless investigation of Steven A. Cohen, a hedge fund billionaire, turned up phone records showing that just after he spoke to an employee who possessed inside information, Mr. Cohen placed a major trade. Federal prosecutors ultimately indicted Mr. Cohen’s hedge fund, SAC Capital Advisors, but never charged the billionaire himself.
In some ways, the investigation into Mr. Icahn echoes the pursuit of Mr. Cohen. While authorities are interested in those who traded on Clorox, the ultimate focus is a Wall Street titan.
In the case of Clorox, authorities have some additional hurdles. For example, they have struggled to establish that Mr. Icahn and Mr. Walters were close enough that the financier might jeopardize his long-running career to share secrets about his Clorox strategy with an acquaintance like Mr. Walters.
There is little in the public record linking the two men to business deals — and even less that suggests they socialized together in Las Vegas.
The most visible connection is a mobile data provider called Voltari, where Mr. Icahn’s son is a director and whose largest shareholders are firms controlled by Mr. Icahn. A small Nevada company controlled by Mr. Walters and his business partners was an early-stage investor in the company, though that hardly suggests that Mr. Icahn would alert Mr. Walters to inside information.
Federal authorities may also be grappling with whether Mr. Icahn, even if he did leak the information, violated the law. Under the laws that govern insider trading, it is not illegal to leak secrets about a future trade.
For such a leak to cause a legal problem, a bidder for Clorox would, for example, have had to breach a duty of confidentiality to his or her own investors.
And in certain cases, even if there is no duty of confidentiality, someone who is mounting a takeover bid may not leak “material, nonpublic information” about a tender offer. But in the case of Clorox, Mr. Icahn never submitted a tender offer.
The confluence of golf and an insider trading investigation is hardly new. The golf course has become something of an ideal scene for consummating many a big corporate deal. Wall Street investment banks often hold golf outings for investors, analysts and executives.
In 2001, the S.E.C. and federal prosecutors charged a San Diego man with making $137,485 in illegal profits from a stock tip he got while golfing with the director of a company that was in the middle of merger negotiations. Last year, an executive at KPMG, one of the country’s largest accounting firms, was accused of leaking tips to a frequent golf partner. The San Diego man and the KPMG executive both pleaded guilty.
As for Mr. Mickelson, a three-time winner of the Masters golf tournament, he has played through the distractions.
But he finds himself in something of a slump just as he enters a critical period in his playing career: the run-up to an attempt to complete a career Grand Slam by winning the United States Open. It is the first time since 2003 that he has gone this far into a P.G.A. Tour season without a victory.
At the Ohio tournament on Saturday, the crowd cheered Mr. Mickelson, saying, “Good luck, Phil,” and, “You’re the man, Phil.” From his fellow golfer Robert Garrigus, Mr. Mickelson received some playful ribbing.
“How’s it going, Phil?” he asked. Mr. Mickelson, letting out a laugh, replied, “Been an interesting evening.”
Mr. Garrigus added in jest that “I’m not sure I want to talk to you now.”
Karen Crouse contributed reporting.
An article on May 31 about an insider trading investigation, using information from people briefed on the inquiry, overstated the scope of an investigation involving the golfer Phil Mickelson. While investigators are looking at his trading in some stocks, Clorox is not among them. The error was repeated in articles on June 1 and June 2 and in the Common Sense column on Saturday. An article about the latest developments in the investigation appears today on Page B1.