7 ms·

Carl Icahn’s Failed Raid on Washington

135 points by GabrielF00 9y ago

rayiner 9y ago
Corn lobby beats oil lobby this round. Yawn.
- pavlov 9y ago
  That's not the story. It's that someone appointed as "special advisor to the President on issues relating to regulatory reform" didn't actually have any interest in reforming regulations except for one very specific niche issue that has been affecting the profits at his refinery. He tried to pull a fast one and even wrote an executive order, hoping Trump would sign it. Even though it didn't work out, the refinery made handsome profits by short-selling a regulatory instrument, apparently by exploiting information from Icahn. It's an interesting background piece around Trump's regulatory teardown, one of the few issues where he can claim to have accomplished anything close to his campaign promises.
- Animats 9y ago
  Meanwhile, Icahn makes money on the deal, by anticipating market reaction to his lobbying. Even though it doesn't succeed, the market drops, his short selling profits, and he's up about $200M.
  - klipt 9y ago
    Does that not violate insider trading laws?
    - evan_ 9y ago
      You would think so, but apparently not. (Or perhaps more accurately, "maybe, but it would be politically inconvenient to investigate.") From the article: > In May, after the revelations about the rin trading by CVR, the senators wrote to the heads of the S.E.C., the E.P.A., and the Commodities Futures Trading Commission, calling on them to investigate. But it could not have escaped the senators’ attention that two recipients of their letter—Jay Clayton and Scott Pruitt—had met with Icahn in the context of securing their jobs. The Senate Democrats cannot issue subpoenas to agencies unless they get the Republican majority to sign on—an unlikely outcome. In May, the C.F.T.C. replied to the senators’ letter: the agency would not be investigating Icahn or CVR, because rins, even though they are commodities, do not trade on a futures market, and the agency therefore had no jurisdiction to look into the matter. By this logic, the fifteen-billion-dollar market for renewable-fuel credits is not regulated by any government agency.
    - wavefunction 9y ago
      It's a good question for most of the Trump administration.
    - coliveira 9y ago
      Insider trading laws were written for small fish. Large players are protected because, apparently, the trading they do is "public". So, the thinking goes, it is just fine if they use inside information for their deals. A guy who uses inside information in every deal is, of course, Warren Buffet. But since he is big and a long term investor, they see no problem.
      - jacquesm 9y ago
        > A guy who uses inside information in every deal is, of course, Warren Buffet. I don't think that will hold water.
      - valuearb 9y ago
        LOL, which is why he's spent the last 60 years of his career in Omaha, Nebraska. And doesn't "trade" anything. Do you even know what insider trading is, and anything about the laws surrounding it?
      - atomical 9y ago
        I don't agree with your statement about Buffett. I am curious about one thing though. Buffett prefers to buy businesses during a recession when the books aren't looking so hot and Berkshire Hathaway can get a good deal. What sort of insider information could be useful in that scenario?
        matt4077 9y ago
        I believe OP was referring to a few stories that recently showed how Buffett profits from the reaction to the news of his investments, and companies also offering him sweet deals (i. e. buying new stock at a discount) because they see an investment by him as excellent PR. That's not so much insider trading, and "market manipulation" also doesn't completely fit. I guess Buffett has just become a self-fulfilling investment prophet.
        valuearb 9y ago
        Buffett's returns today, while still very good, are a pale shadow of the returns he put up in his first decade, or even his first 30 years. Somehow all these "sweet deals" haven't moved the needle for Berkshire. The real reason current returns are lower is that the constraints on Buffett have grown over time and now are the heaviest they've ever been. Investing a $400B portfolio offers him far fewer opportunities than a $50M or even $10B portfolio did. And announcements of his purchases are very damaging to his returns. Typically only has a month or two before he's required to file with the SEC disclosing significant new purchases. So accumulating billions of dollars of stock in most companies in those months without driving up the price is either impossible or really difficult. Once he files his SEC report, the prices almost always increase substantially from 'free riders' trying to piggyback on his trades. The stock price popping up quickly not good for Buffett, in fact it's terrible. It forces him to stop buying what he regarded as a bargain. He never flips his positions, he's going to hold them for many years, usually many decades. The free rider problem means he has to invest less, and make less on each investment, hurting his returns. And the "sweet deal" allegation is pretty ludicrous. Berkshire is a very special financial source, a CEO can call Buffett directly and get a hard price almost immediately. The price he gives is never very good, but for businesses that need money badly they know he will always close the transaction quickly without trying to renegotiate or bailing out. Goldman Sachs during the 2008 crisis was a good example. Goldman is owned/run by hard eyed partners, but during the crisis their backs were against the wall. They had to add more capital, and were being forced to sell shares at really horrible prices to raise it. They got $5B from Warren in an emergency phone call, and in preferred shares were less dilutive than selling common shares. No one else on earth was willing to step up during that immense crisis and give Goldman a better deal, more likely any deal at all (Lehman had just filed bankruptcy). If someone else gave them a slightly better offer, the sharks at Goldman would have taken it. And Buffett is always laughed at when making these deals because wall street execs claim he overpaid. Its not till years later when the results come in that revisionists says they were obvious sweetheart deals. Yet somehow the revisionists never picked up the phone to get in on them.
    - ringaroundthetx 9y ago
      Insider trading laws are a series of sanctions exclusive to the equities market, about trading equities. This trade didn't involve equities. There is nothing illegal about having an edge in the capital markets. Even if the CFTC did "investigate", there isn't a prohibition on having "inside information" in the futures markets either... for the most part. You have to look at the history and intent. Investing in companies is a great way to grow an economy, adding a ring of confidence by the state helps promote that so they can push that kind of investment exclusively on the population. As a result stock investing is really popular but the rules around it are extrapolated to being relevant to other capital markets only due to the similarities of trading.
    - tptacek 9y ago
      Insider trading is an agency problem. You're in trouble if you have a fiduciary duty to someone else (either overtly or implied, directly or indirectly) and you take advantage of insider information to trade against their interests. Using information only you have to trade in the market is not "insider trading" by itself; in fact, it's the only way the markets can actually function!
      - jonknee 9y ago
        That’s not quite the case, it’s insider trading if you’re using non public material information no matter what account it benefits. https://www.sec.gov/fast-answers/answersinsiderhtm.html https://www.sec.gov/fast-answers/answersinsiderhtm.html > The SEC adopted new Rules 10b5-1 and 10b5-2 to resolve two insider trading issues where the courts have disagreed. Rule 10b5-1 provides that a person trades on the basis of material nonpublic information if a trader is "aware" of the material nonpublic information when making the purchase or sale.
        tptacek 9y ago
        According to the actual text of the rules, both are particular to preexisting agency relationships (really, to insiders of public companies). Are you just pointing out that the SEC will come after you even if you're not trading against the interests of your shareholders/clients/whatever?
  - valuearb 9y ago
    If he still is shorting the credits he's at risk of being forced to cover at a massive cost. He could get short squeezed really hard, and which is why other wall street players are shorting his refineries stock.
csours 9y ago
> Because most attendants were women, Icahn insisted, they were not “breadwinners,” and should not expect compensation commensurate with that of male employees. At one point in the negotiations, he reportedly suggested that if the flight attendants were having such trouble making ends meet they “should have married a rich husband.” (Icahn denied having made sexist comments.) C. E. Meyer, the company’s chief executive, described Icahn as “one of the greediest men on earth.” T.W.A. eventually went out of business. What a nice fellow.
timefractions 9y ago
Isn't he one of Lyft's biggest investors?
AVTizzle 9y ago
Seems like this piece made an impact before going live: "Trump advisor Carl Icahn resigned ahead of negative magazine article" http://www.latimes.com/nation/nationnow/la-na-icahn-resignation-20170819-story.html http://www.latimes.com/nation/nationnow/la-na-icahn-resignat...
- __derek__ 9y ago
  And the departure caused the article to be published early[1]: > I've been reporting on Carl Icahn's role as an adviser to Trump. Monday, in an email to me, the White House fired him. Today, he resigned. [1] https://twitter.com/praddenkeefe/status/898674961161662464 https://twitter.com/praddenkeefe/status/898674961161662464
kelukelugames 9y ago
>Icahn’s role was novel. He would be an adviser with a formal title, but he would not receive a salary, and he would not be required to divest himself of any of his holdings, or to make any disclosures about potential conflicts of interest. “Carl Icahn will be advising the President in his individual capacity,” Trump’s transition team asserted. In the months after the election, the stock price of CVR, Icahn’s refiner, nearly doubled—a surge that is difficult to explain without acknowledging the appointment of the company’s lead shareholder to a White House position. The rally meant a personal benefit for Icahn, at least on paper, of half a billion dollars. There was an expectation in the market—an expectation created, in part, by Icahn’s own remarks—that, with Trump in the White House and Icahn playing consigliere, the rules were about to change, and not just at the E.P.A. Icahn’s empire ranges across many economic sectors, from energy to pharmaceuticals to auto supplies to mining, and all of them are governed by the types of regulations about which he would now potentially be advising Trump. How is this shit legal?
- jacquesm 9y ago
  > How is this shit legal? In a banana republic? Or in a country that takes these things serious? It all depends on where you live. The absolutely incredible conflicts of interest the Trump administration has brought into the whitehouse ought to have been enough to put several people behind bars. The brands of family members are openly advertised by whitehouse advisors on national TV and the president did not divest himself from his holdings but created some kind of smoke-and-mirrors version of divestment. It's ridiculous, and it sets the tone for the rest of the nation. If you feel that it isn't legal you are probably right but it would require someone in a position in power to do something about it and that is not going to happen for the time being. The real problem this causes: precedent has been set and future administrations will not feel bound by these rules any more.
  - maxerickson 9y ago
    It isn't all that unlikely that new laws will be passed (for example, there were substantial reforms after Watergate/Nixon). A big part of the problem is that a lot of the ethics rules surrounding the president are just norms, they aren't laws. If we are real lucky the imperial office of the president will be neutered quite a lot.
valuearb 9y ago
Great article, I love Carl Icahn stories. He's an unrepentant SOB, and massively OCD. He's a smart guy who is right a lot, usually thinks clearly about the long term, and that makes this story so compelling he's put his own nuts in a vise over such a trivial benefit, while relying on an idiot "friend". I mean Icahn should not be this dumb, ever. Great quotes in the article as well. "But, in reality, many New York financiers considered him a buffoon. In 2015, Lloyd Blankfein, the C.E.O. of Goldman Sachs, greeted the suggestion that Trump might run for President by remarking that the notion of the former star of “The Apprentice” having his “finger on the button blows my mind.” "In 2010, Trump again found himself in trouble in Atlantic City. But this time Icahn was his antagonist. Along with a Texas banker, Icahn was trying to gain control of three Trump casinos. When a lawyer asked, during a deposition, whether Icahn intended to rebrand the casinos, he said that a consultant had deemed the Trump name a “disadvantage.” In an interview, Trump shot back, “Everybody wants the brand, including Carl. It’s the hottest brand in the country.” But in Icahn’s opinion the only real downside to shedding the Trump name was the expense that would be associated with changing all the signage" "In court papers, Icahn’s lawyers suggested that Trump’s name was no longer “synonymous with business acumen, high quality, and style.” Icahn told the Wall Street Journal, “I like Donald personally, but frankly I’m a little curious about the big deal about the name.” If the Trump brand carried such cachet, he asked, why did Trump properties keep going bankrupt?"
- metaobject 9y ago
  I'm not sure I'd call ~$500 million a trivial benefit.
  - valuearb 9y ago
    It's a $200m a year benefit based on what the refinery paid last year for the credits . The article used a jump in the stock price to say Icahn made $500M, but that's not really true because 1) Stock prices go up for many reasons 2) Icahn didn't sell to monetize in that gain and hasn't sold yet. And likely wasn't going to sell even if RIN reform passed. 3) Now that he's resigned and the odds of passing any RIN reform is virtually zero, the refinery's stock has zero RIN value in it. I say it's trivial because $200m a year on a $17B portfolio is barely 0.1% a year. His deal-making efforts are worth many times that, at least 10% a year. So why get tied up in a mud fight with a pig over a scrap of a morsel?

135 points by GabrielF00 9y ago

rayiner 9y ago

Corn lobby beats oil lobby this round. Yawn.

pavlov 9y ago
That's not the story. It's that someone appointed as "special advisor to the President on issues relating to regulatory reform" didn't actually have any interest in reforming regulations except for one very specific niche issue that has been affecting the profits at his refinery. He tried to pull a fast one and even wrote an executive order, hoping Trump would sign it. Even though it didn't work out, the refinery made handsome profits by short-selling a regulatory instrument, apparently by exploiting information from Icahn. It's an interesting background piece around Trump's regulatory teardown, one of the few issues where he can claim to have accomplished anything close to his campaign promises.
Animats 9y ago
Meanwhile, Icahn makes money on the deal, by anticipating market reaction to his lobbying. Even though it doesn't succeed, the market drops, his short selling profits, and he's up about $200M.
- klipt 9y ago
  Does that not violate insider trading laws?
  - evan_ 9y ago
    You would think so, but apparently not. (Or perhaps more accurately, "maybe, but it would be politically inconvenient to investigate.") From the article: > In May, after the revelations about the rin trading by CVR, the senators wrote to the heads of the S.E.C., the E.P.A., and the Commodities Futures Trading Commission, calling on them to investigate. But it could not have escaped the senators’ attention that two recipients of their letter—Jay Clayton and Scott Pruitt—had met with Icahn in the context of securing their jobs. The Senate Democrats cannot issue subpoenas to agencies unless they get the Republican majority to sign on—an unlikely outcome. In May, the C.F.T.C. replied to the senators’ letter: the agency would not be investigating Icahn or CVR, because rins, even though they are commodities, do not trade on a futures market, and the agency therefore had no jurisdiction to look into the matter. By this logic, the fifteen-billion-dollar market for renewable-fuel credits is not regulated by any government agency.
  - wavefunction 9y ago
    It's a good question for most of the Trump administration.
  - coliveira 9y ago
    Insider trading laws were written for small fish. Large players are protected because, apparently, the trading they do is "public". So, the thinking goes, it is just fine if they use inside information for their deals. A guy who uses inside information in every deal is, of course, Warren Buffet. But since he is big and a long term investor, they see no problem.
    - jacquesm 9y ago
      > A guy who uses inside information in every deal is, of course, Warren Buffet. I don't think that will hold water.
    - valuearb 9y ago
      LOL, which is why he's spent the last 60 years of his career in Omaha, Nebraska. And doesn't "trade" anything. Do you even know what insider trading is, and anything about the laws surrounding it?
    - atomical 9y ago
      I don't agree with your statement about Buffett. I am curious about one thing though. Buffett prefers to buy businesses during a recession when the books aren't looking so hot and Berkshire Hathaway can get a good deal. What sort of insider information could be useful in that scenario?
      - matt4077 9y ago
        I believe OP was referring to a few stories that recently showed how Buffett profits from the reaction to the news of his investments, and companies also offering him sweet deals (i. e. buying new stock at a discount) because they see an investment by him as excellent PR. That's not so much insider trading, and "market manipulation" also doesn't completely fit. I guess Buffett has just become a self-fulfilling investment prophet.
        valuearb 9y ago
        Buffett's returns today, while still very good, are a pale shadow of the returns he put up in his first decade, or even his first 30 years. Somehow all these "sweet deals" haven't moved the needle for Berkshire. The real reason current returns are lower is that the constraints on Buffett have grown over time and now are the heaviest they've ever been. Investing a $400B portfolio offers him far fewer opportunities than a $50M or even $10B portfolio did. And announcements of his purchases are very damaging to his returns. Typically only has a month or two before he's required to file with the SEC disclosing significant new purchases. So accumulating billions of dollars of stock in most companies in those months without driving up the price is either impossible or really difficult. Once he files his SEC report, the prices almost always increase substantially from 'free riders' trying to piggyback on his trades. The stock price popping up quickly not good for Buffett, in fact it's terrible. It forces him to stop buying what he regarded as a bargain. He never flips his positions, he's going to hold them for many years, usually many decades. The free rider problem means he has to invest less, and make less on each investment, hurting his returns. And the "sweet deal" allegation is pretty ludicrous. Berkshire is a very special financial source, a CEO can call Buffett directly and get a hard price almost immediately. The price he gives is never very good, but for businesses that need money badly they know he will always close the transaction quickly without trying to renegotiate or bailing out. Goldman Sachs during the 2008 crisis was a good example. Goldman is owned/run by hard eyed partners, but during the crisis their backs were against the wall. They had to add more capital, and were being forced to sell shares at really horrible prices to raise it. They got $5B from Warren in an emergency phone call, and in preferred shares were less dilutive than selling common shares. No one else on earth was willing to step up during that immense crisis and give Goldman a better deal, more likely any deal at all (Lehman had just filed bankruptcy). If someone else gave them a slightly better offer, the sharks at Goldman would have taken it. And Buffett is always laughed at when making these deals because wall street execs claim he overpaid. Its not till years later when the results come in that revisionists says they were obvious sweetheart deals. Yet somehow the revisionists never picked up the phone to get in on them.
  - ringaroundthetx 9y ago
    Insider trading laws are a series of sanctions exclusive to the equities market, about trading equities. This trade didn't involve equities. There is nothing illegal about having an edge in the capital markets. Even if the CFTC did "investigate", there isn't a prohibition on having "inside information" in the futures markets either... for the most part. You have to look at the history and intent. Investing in companies is a great way to grow an economy, adding a ring of confidence by the state helps promote that so they can push that kind of investment exclusively on the population. As a result stock investing is really popular but the rules around it are extrapolated to being relevant to other capital markets only due to the similarities of trading.
  - tptacek 9y ago
    Insider trading is an agency problem. You're in trouble if you have a fiduciary duty to someone else (either overtly or implied, directly or indirectly) and you take advantage of insider information to trade against their interests. Using information only you have to trade in the market is not "insider trading" by itself; in fact, it's the only way the markets can actually function!
    - jonknee 9y ago
      That’s not quite the case, it’s insider trading if you’re using non public material information no matter what account it benefits. https://www.sec.gov/fast-answers/answersinsiderhtm.html https://www.sec.gov/fast-answers/answersinsiderhtm.html > The SEC adopted new Rules 10b5-1 and 10b5-2 to resolve two insider trading issues where the courts have disagreed. Rule 10b5-1 provides that a person trades on the basis of material nonpublic information if a trader is "aware" of the material nonpublic information when making the purchase or sale.
      - tptacek 9y ago
        According to the actual text of the rules, both are particular to preexisting agency relationships (really, to insiders of public companies). Are you just pointing out that the SEC will come after you even if you're not trading against the interests of your shareholders/clients/whatever?
- valuearb 9y ago
  If he still is shorting the credits he's at risk of being forced to cover at a massive cost. He could get short squeezed really hard, and which is why other wall street players are shorting his refineries stock.

csours 9y ago

> Because most attendants were women, Icahn insisted, they were not “breadwinners,” and should not expect compensation commensurate with that of male employees. At one point in the negotiations, he reportedly suggested that if the flight attendants were having such trouble making ends meet they “should have married a rich husband.” (Icahn denied having made sexist comments.) C. E. Meyer, the company’s chief executive, described Icahn as “one of the greediest men on earth.” T.W.A. eventually went out of business. What a nice fellow.

timefractions 9y ago

Isn't he one of Lyft's biggest investors?

AVTizzle 9y ago

Seems like this piece made an impact before going live: "Trump advisor Carl Icahn resigned ahead of negative magazine article" http://www.latimes.com/nation/nationnow/la-na-icahn-resignation-20170819-story.html http://www.latimes.com/nation/nationnow/la-na-icahn-resignat...

__derek__ 9y ago
And the departure caused the article to be published early[1]: > I've been reporting on Carl Icahn's role as an adviser to Trump. Monday, in an email to me, the White House fired him. Today, he resigned. [1] https://twitter.com/praddenkeefe/status/898674961161662464 https://twitter.com/praddenkeefe/status/898674961161662464

kelukelugames 9y ago

>Icahn’s role was novel. He would be an adviser with a formal title, but he would not receive a salary, and he would not be required to divest himself of any of his holdings, or to make any disclosures about potential conflicts of interest. “Carl Icahn will be advising the President in his individual capacity,” Trump’s transition team asserted. In the months after the election, the stock price of CVR, Icahn’s refiner, nearly doubled—a surge that is difficult to explain without acknowledging the appointment of the company’s lead shareholder to a White House position. The rally meant a personal benefit for Icahn, at least on paper, of half a billion dollars. There was an expectation in the market—an expectation created, in part, by Icahn’s own remarks—that, with Trump in the White House and Icahn playing consigliere, the rules were about to change, and not just at the E.P.A. Icahn’s empire ranges across many economic sectors, from energy to pharmaceuticals to auto supplies to mining, and all of them are governed by the types of regulations about which he would now potentially be advising Trump. How is this shit legal?

jacquesm 9y ago
> How is this shit legal? In a banana republic? Or in a country that takes these things serious? It all depends on where you live. The absolutely incredible conflicts of interest the Trump administration has brought into the whitehouse ought to have been enough to put several people behind bars. The brands of family members are openly advertised by whitehouse advisors on national TV and the president did not divest himself from his holdings but created some kind of smoke-and-mirrors version of divestment. It's ridiculous, and it sets the tone for the rest of the nation. If you feel that it isn't legal you are probably right but it would require someone in a position in power to do something about it and that is not going to happen for the time being. The real problem this causes: precedent has been set and future administrations will not feel bound by these rules any more.
- maxerickson 9y ago
  It isn't all that unlikely that new laws will be passed (for example, there were substantial reforms after Watergate/Nixon). A big part of the problem is that a lot of the ethics rules surrounding the president are just norms, they aren't laws. If we are real lucky the imperial office of the president will be neutered quite a lot.

valuearb 9y ago

Great article, I love Carl Icahn stories. He's an unrepentant SOB, and massively OCD. He's a smart guy who is right a lot, usually thinks clearly about the long term, and that makes this story so compelling he's put his own nuts in a vise over such a trivial benefit, while relying on an idiot "friend". I mean Icahn should not be this dumb, ever. Great quotes in the article as well. "But, in reality, many New York financiers considered him a buffoon. In 2015, Lloyd Blankfein, the C.E.O. of Goldman Sachs, greeted the suggestion that Trump might run for President by remarking that the notion of the former star of “The Apprentice” having his “finger on the button blows my mind.” "In 2010, Trump again found himself in trouble in Atlantic City. But this time Icahn was his antagonist. Along with a Texas banker, Icahn was trying to gain control of three Trump casinos. When a lawyer asked, during a deposition, whether Icahn intended to rebrand the casinos, he said that a consultant had deemed the Trump name a “disadvantage.” In an interview, Trump shot back, “Everybody wants the brand, including Carl. It’s the hottest brand in the country.” But in Icahn’s opinion the only real downside to shedding the Trump name was the expense that would be associated with changing all the signage" "In court papers, Icahn’s lawyers suggested that Trump’s name was no longer “synonymous with business acumen, high quality, and style.” Icahn told the Wall Street Journal, “I like Donald personally, but frankly I’m a little curious about the big deal about the name.” If the Trump brand carried such cachet, he asked, why did Trump properties keep going bankrupt?"

metaobject 9y ago
I'm not sure I'd call ~$500 million a trivial benefit.
- valuearb 9y ago
  It's a $200m a year benefit based on what the refinery paid last year for the credits . The article used a jump in the stock price to say Icahn made $500M, but that's not really true because 1) Stock prices go up for many reasons 2) Icahn didn't sell to monetize in that gain and hasn't sold yet. And likely wasn't going to sell even if RIN reform passed. 3) Now that he's resigned and the odds of passing any RIN reform is virtually zero, the refinery's stock has zero RIN value in it. I say it's trivial because $200m a year on a $17B portfolio is barely 0.1% a year. His deal-making efforts are worth many times that, at least 10% a year. So why get tied up in a mud fight with a pig over a scrap of a morsel?