Image credit: By minds-eye (Flickr) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Are Pro Golfers Committing Financial Fraud?

Friendly, but big stakes betting amongst a few PGA Tour players raises questions about the potential for financial shenanigans

Professional golfer Phil Mickelson (aka ‘Lefty’), who has won 42 tournaments and five majors on the PGA Tour, was inducted into the World Golf Hall of Fame in 2011. Mickelson has earned more than $77 million over three decades and also has “lucrative endorsement deals with Callaway, Barclays, KPMG, Exxon Mobil, Rolex and Amgen that collectively pay him more than $40 million annually,” according to Forbes.

Mickelson also seemingly has a gambling problem. It has put him in the crosshairs of a number of federal investigations related to financial fraud, be it money laundering, insider trading, or trying to send illicit funds off-shore.

As the US Open begins play today at Oakmont Country Club, Mickelson will likely be considered one of the favorites. He hopes to win the one major championship that has so far escaped him in his career, and where he has finished runner-up a frustrating six times. I suspect that when the tournament concludes on Father’s Day, Mickelson will be nowhere near the lead. In fact, I think his game and interest have faded over the past few years to the point where he is more interested in the easy gains offered by gambling on Sportsbooks than in facing the pressures, frustrations and potential embarrassments often exposed during final rounds at major championships (see Jordan Spieth at this year’s Masters Championship). And I further suspect that he’d rather make easy money by needling younger opponents foolish enough to join his infamous money games during the Tour’s Tuesday practice rounds.

Questions about Mickelson’s financial scruples have been raised for years and, though he has never been indicted, I typically operate by the philosophy of, ‘where there is smoke there is fire.’ A short list of criminal financial activity where he has been mentioned publicly includes:

  • In 2014, Mickelson was investigated for insider trading of a Clorox stock. No charges were filed.
  • Mickelson’s betting bookie, Gregory Silveira, is scheduled to be sentenced on October 5 in U.S. District Court, after pleading guilty to laundering approximately $2.75 million between 2010–2013 that, according to ESPN, “belonged to Mickelson.” Silveira is facing a 60-year prison sentence.
  • Most recently, Mickelson was named as a relief defendant in an insider trading case involving Dean Foods. Despite avoiding any criminal charges, Mickelson paid the SEC $931,000 in restitution.

Do these three incidents make Mickelson a criminal? Not necessarily. I think the jury is still out, except among golf fans who continue to idolize Mickelson in spite of his well-known indiscretions. Perhaps it’s the result of his contagious smile and his gorgeous golf swing? Even the golfing media seems to cut him a break. In Money Matches with Phil Mickelson, ESPN’s Shane Ryan breaks down Mickelson’s tradition of wrangling fellow pros to play money games with him during the Tour’s traditional Tuesday practice rounds. The smart ones bag out and refuse to play. Those who accept typically fall victim to Lefty’s mental hazing on the course and attempts to ‘get in their heads,’ and as a result, often walk toward the 19th hole with a lot less cash in their pockets than what they had when they teed off.

How much cash are we talking about? According to Ryan, “players don’t like to talk about the amount wagered, but sources close to the tour say that a typical round will start with a $1,000 bet on every match. Totals can mount with presses and other prop bets, and if everything goes wrong, a player could potentially lose upward of five figures in 18 holes.”

In my world, five figures, if not deposited and declared to the IRS, should raise a red flag with financial regulators. Yet, Ryan never even addresses it, or ponders whether or not Mickelson reports his Tuesday income. I may be trolling down a rat hole here, because for all I know Mickelson’s accountant is incredibly busy each Tuesday and/or Wednesday, but my curiosity often gets the best of me. And what about those players that agree to play his games? Certainly they have pulled some cash from him over the years? Has that income been reported?

According to Lefty, “One of them [the rules] is you don’t discuss certain things [with the media]. You don’t discuss specifics of what you play for.”

According to the IRS, taxpayers are required to issue a Form W-2G if they receive certain gambling winnings, or if they have any gambling winnings subject to federal income tax withholding. Taxpayers must report all gambling winnings on their Form 1040 as ‘other income,’ including winnings that are not subject to withholding. Conversely, taxpayers can deduct gambling losses so long as the amount of losses they deduct don’t trump the amount of gambling income reported.

Those ‘Tuesday’ players in question, aside from Mickelson, will likely be in contention for the US Open trophy on Sunday. Here’s hoping that they follow the rule of law in the financial industry as well as they follow the rules of golf. Otherwise, they could find themselves in the next version of the Panama Papers, where fellow major champions Nick Faldo, Retief Goosen, Ian Woosnam and Padraig Harrington recently made embarrassing appearances that required official press conferences of explanation to report that basically, ‘nothing was amiss. Nothing to see here. Move on.’

I, for one, can’t wait to see the list of Americans implicated in the Panama Papers. I fully expect Mickelson to be included on that list, if it ever appears. And too, once Mickelson reaches the twilight of his career where the KPMGs and Rolexes of the world no longer pay his bills, I suspect we will see some sort of financial fraud indictment come down on Lefty.

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CEO of the Alacer Group. Sharing the latest news in financial crimes and best practices that enable financial institutions to prevent money laundering.

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Richard Paxton

Richard Paxton

CEO of the Alacer Group. Sharing the latest news in financial crimes and best practices that enable financial institutions to prevent money laundering.

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