By Brendan Pierson
NEW YORK (Reuters) - Former Dean Foods Co Chairman Tom Davis on Tuesday told jurors in Manhattan federal court that he passed insider information to Las Vegas sports gambler William "Billy" Walters using a cell phone the two called the "bat phone."
Davis, who has pleaded guilty to insider trading charges and is cooperating with prosecutors, began testifying on the third day of Walters' criminal insider trading trial.
Prosecutors say Walters was able to make more than $40 million thanks to tips from Davis, and that Walters passed insider information on to star golfer Phil Mickelson. Mickelson is not accused of wrongdoing.
Walters has pleaded not guilty. His lawyer, Barry Berke, told jurors last week that Walters never received any inside information, and that he made money trading stocks using the same skills that made him a successful sports gambler.
Davis, 68, told jurors on Tuesday during direct examination by Assistant U.S. Attorney Brooke Cucinella that Walters told him to use an assigned cell phone to talk about Dean Foods.
"We called it the bat phone," Davis said.
Walters asked him to refer to the dairy processing company in those communications as "the Dallas Cowboys," Davis testified.
After Federal Bureau of Investigation agents interviewed Davis in 2014, he threw the bat phone a creek near his home, Davis testified.
Davis said the insider information he gave Walters included advance notice of quarterly earnings reports and of Dean Foods' 2012 spinoff of part of its business as WhiteWave Foods Co.
Davis testified that in 2010, facing financial difficulties, he asked Walters for a loan.
"I felt highly confident Billy would help me out," he said. Part of that confidence, he said, was because he had given Walters insider information.
Walters eventually arranged for a $625,000 loan to Davis through a friend of his, Davis testified.
Davis said that although he initially denied wrongdoing when he was questioned by federal authorities, he decided to start cooperating after suffering a stroke in late 2015 that he said prompted him to reflect on his conduct.
Davis' direct examination will continue on Wednesday.
Walters, 70, was arrested in May 2016 in Las Vegas on charges of securities and wire fraud.
In addition to the claims involving Dean Foods, Walters is also accused of making $1 million trading on a tip about Darden Restaurants Inc.
The case is U.S. v. Davis et al, U.S. District Court, Southern District of New York, No. 16-cr-00338.
(Reporting by Brendan Pierson; Editing by Richard Chang and Lisa Shumaker)