Here's the New Yorker article that everyone is talking about, the one about
Carl Icahn that ran just before he was fired, I think.
Miriam
After Icahn became a special adviser to the President, one of his associates
called it 'the cheapest takeover Carl's ever done.' (image: Ben Jones)
Carl Icahn's Failed Raid on Washington
By Patrick Radden Keefe, The New Yorker
23 August 17
Was President Trumps richest adviser focussed on helping the countryor his
own bottom line?
One day in August, 2016, the financier Carl Icahn made an urgent phone call
to the Environmental Protection Agency. Icahn is one of the richest men on
Wall Street, and he has thrived, in no small measure, because of a capacity
to intimidate. A Texas-based oil refiner in which he had a major stake was
losing money because of an obscure environmental rule that Icahn regarded as
unduly onerous. Icahn is a voluble critic of any government regulation that
constrains his companies. So he wanted to speak with the person in charge of
enforcing the policy: a senior official at the E.P.A. named Janet McCabe.
Icahn works from a suite of offices, atop the General Motors Building, in
midtown, that are decorated in the oak-and-leather fashion of a tycoons
lair in a nineteen-eighties film. During that decade, Icahn made his
reputation as one of the original corporate raiders, pioneering the art of
the hostile takeover and establishing himself as a human juggernauta
pugnacious deal machine, all avarice and swagger. By the time he called the
E.P.A., he was eighty, and long since unburdened of any personal or dynastic
need to make money; according to Forbes, he is worth approximately seventeen
billion dollars. Plenty of titans who are not as old and not as rich as
Icahn have opted to devote their remaining years to spending their money, or
to giving it away. Not Icahn. A tall man with a shambling manner, he
recently grew a white beard, which softens his round face, giving him the
cuddly appearance of an elderly Muppet. But he has not lost his taste for
the kill. A few years ago, he sold his mega-yacht, because cruising on it
bored him. He has engaged in philanthropy, building charter schools and a
stadium on Randalls Island that bears his name. But the charity circuit is
a snooze. What Icahn loves beyond all else is to rise late each morning, and
then to spend the rest of the day and much of the night working the phone,
making deals. Years ago, a reporter asked Icahn why he kept making money
when he already had more than he could ever spend. Its a way of keeping
score, he said. He is one of the wealthiest individuals not just in the
world but in the history of the worlda man who takes pride in many things,
not the least of which is his ability to get just about anybody on the
phone.
Shes on vacation, McCabes assistant said, flatly.
For how long?
Two weeks.
To Icahn, there was something that simply did not compute about going on
vacation and leaving ones work behind. Surely, he insisted, McCabe could
interrupt whatever leisure activity she was engaged in to take a pressing
phone call from Carl Icahn?
No, McCabes assistant informed him. She couldnt.
The old conundrum about whether it is better to be loved or feared has never
posed much of a dilemma for Icahn. In King Icahn, a 1993 biography, the
author, Mark Stevens, described his subject as a germophobic, detached,
relatively loveless man, and quoted one contemporary saying, Carls dream
in life is to have the only fire truck in town. Then when your house is in
flames, he can hold you up for every penny you have. When the biography was
published, Icahn stocked his office with copies to give to visitors. These
days, he bristles at the term corporate raider, favoring the euphemism
activist investor, but the reality is that when Icahn targets a company
the response from management is generally terror. He has a volatile temper
and a vindictive streak. Everyone makes time to take his calls.
Incredulous that Janet McCabe might not do so, Icahn asked, What if the
worlds falling apart?
The refiner that he was worried about is CVR Energy, which is based in Sugar
Land, Texas. In 2012, Icahn acquired a controlling stake in the company,
with the intention of making it more profitable and then selling it at a
higher price. But under the Renewable Fuel Standarda law passed, under
George W. Bush, to promote the use of ethanol and other biofuelsrefiners
like CVR are forced either to blend ethanol into their products or to
purchase credits, known as Renewable Identification Numbers, from refiners
that do. CVR did not make sufficient investments to blend ethanol into all
its products, choosing to buy credits instead. When Icahn bought his shares
in the refiner, RINs were cheapabout a nickel eachso it was reasonably
affordable for the company to comply with the law. But in 2013 the price of
RINs, which had been stable, began fluctuating, and by 2016 the company was
spending two hundred million dollars a year on credits. When Icahn called
McCabe, CVRs stock had dropped seventy per cent from the previous year.
This incensed him.
Look, Im too old to be politically correct, he told CNBC, on September
13th. This woman, Janet McCabe . . . shes never run a business. Icahn
pointed out that, at the risk of being immodest, he had made a great deal
of money in his career. The government shouldnt run things, because they
arent trained to run things, he continued. This is a core element of
Icahns philosophy. Jimmy Williams, a former in-house lobbyist for Icahn,
told me, Carl is a man who thinks that business should be unfettered and
that government should not be involved in the free-market economy. With
every fibre in his body, that is what he truly believes.
When Icahn couldnt reach McCabe, he wrote a blistering open letter to the
E.P.A., in which he demanded that the rules be changed so that other
parties, and not refiners, would be responsible for blending ethanol or
purchasing credits. At the risk of being immodest, he wrote, most
respected experts involved in markets and the way they function would agree
there are few in the country that understand investing in markets better
than I do.
One person who was listening to Icahn was the Republican Presidential
nominee, Donald Trump. Icahn and Trump have known each other for decades,
and Icahn supported his friends aspirations for the White House at a time
when they still looked quixotic. Trump has long boasted about his
association with more successful businesspeople, dropping references to
potentates the way kids decorate their school binders with the names of
their favorite pop stars. 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 this context, an endorsement from
Icahn was a precious credential. On the campaign trail, Trump bragged about
his very dear friend Carl Icahn, the name functioning as a byword for
boundless prosperity.
If Icahn was willing to be enlisted in this fashion, he was also prepared to
drop Trumps name when it served his interest. Appearing on Bloomberg TV on
August 16, 2016, he vowed that Trump would put an end to these crazy
regulations on his first day in office. In fact, Icahn continued, he had
spoken with Trump about the E.P.A. rule obliging his refiner to purchase
renewable-fuel credits. If elected, Trump will stop that, Icahn promised.
Thats a hundred per cent.
Several weeks after Trumps victory, Icahn tweeted, Ive agreed to serve as
a special advisor to the president on issues relating to regulatory reform.
In a press release, Trump said, Carl was with me from the beginning and
with his being one of the worlds great businessmen, that was something I
truly appreciated. He is not only a brilliant negotiator, but also someone
who is innately able to predict the future, especially having to do with
finances and economies. He added that Icahn would help him address
regulations that were strangling American business.
Icahns 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, Trumps transition team asserted.
In the months after the election, the stock price of CVR, Icahns refiner,
nearly doubleda surge that is difficult to explain without acknowledging
the appointment of the companys 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 marketan expectation
created, in part, by Icahns own remarksthat, with Trump in the White House
and Icahn playing consigliere, the rules were about to change, and not just
at the E.P.A. Icahns 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.
Janet McCabe, who left the E.P.A. in January, and now works at the
Environmental Law and Policy Center, told me, Im not naïve. People in
business try to influence the government. But the job of the government is
to serve the American people, not the specific business interests of the
Presidents friends. To think that you have somebody with that kind of
agenda bending the Presidents ear is troubling.
Conflicts of interest have been a defining trait of the Trump
Administration. The President has not only refused to release his tax
returns; he has declined to divest from his companies, instead putting them
in a trust managed by his children. Questions have emerged about the ongoing
business ties of his daughter and son-in-law, Ivanka Trump and Jared
Kushner, who, since early 2016, have reaped as much as two hundred million
dollars from the Trump hotel in Washington, D.C., and from other
investments. Although Trump promised to drain the swamp, he has assembled
a Cabinet of ultra-rich Americans, including two billionaires: Betsy DeVos,
the Secretary of Education, and Wilbur Ross, the Secretary of Commerce.
But Icahn is worth more than the Trump family and all the members of the
Cabinet combinedand, with no constraint on his license to counsel the
President on regulations that might help his businesses, he was poised to
become much richer. Robert Weissman, who runs the watchdog group Public
Citizen, told me, This kind of self-enrichment and influence over
decision-making by an individual mogul who is simultaneously inside and
outside the Administration is unprecedented. In terms of corruption, theres
nothing like it. Maybe ever. In conversations with me, financiers who have
worked with Icahn described his appointment as a kind of corporate raid on
Washington. One said, Its the cheapest takeover Carls ever done.
If you squint, Trump and Icahn look alike. Both grew up in Queens and have
an outer-borough chip on their shoulders. Both first came to tabloid
prominence against the gaudy backdrop of the nineteen-eighties. Both are
brash, plainspoken street fighters, examples of an American archetype: the
populist rich guy. But Trump comes from the wealthy enclave of Jamaica
Estates, whereas Icahn grew up in a lower-middle-class family in Bayswater.
His mother, Bella, was a schoolteacher; his father, Michael, was a failed
opera singer who, even though he was an atheist, became the cantor in a
local synagogue, because he loved the music. Carl was an only child, born
toward the end of the Depression, in 1936. Throughout his youth, his father
railed against the robber barons, condemning the concentration of extreme
wealth. Icahn told Mark Stevens, The social juxtaposition of a tiny group
of people living in great splendor and many more living in abject poverty
was anathema to him.
As a boy, Icahn was bright and ambitious. When he was offered a scholarship
to Woodmere Academy, an expensive private school on the South Shore of Long
Island, his parents toured the campus and met with teachers. But they
worried about the values that their son would be exposed to there, so they
sent him to public high school instead. The sting of that reversal lingered.
Half a century later, in the heat of a high-stakes negotiation, Icahn would
occasionally digress to inform his adversaries that although he attended
public school instead of Woodmere Academy, he still went on to become a
billionaire. Icahn is an old man now, with an old mans penchant for
repeating stories; he frequently returns to the theme that his parents
underestimated him. My father was never able to accomplish anything, he
once said, adding, I never respected him.
In 1960, after studying philosophy at Princeton (where he wrote a thesis
titled The Problem of Formulating an Adequate Explication of the Empiricist
Criterion of Meaning) and a stint in medical school (he was a
hypochondriac, which did not help his bedside manner), Icahn shifted to Wall
Street. For a time, he worked as an arbitrageur, but he eventually
established himself as a takeover artist, orchestrating high-profile raids
on companies such as Texaco, RJR Nabisco, and Phillips Petroleum. His method
was straightforward: he identified businesses whose assets were worth more
than their stock; he acquired enough of that stock to force changes in the
company which drove up the stock price; then he sold the stock. Implicit in
Icahns approach was the conviction that he was smart enough to know more
about how to make money in a given business than the executives who actually
ran the business. He regarded the management at the companies he targeted
with contempt. Unlike Trump, Icahn was not one to insinuate himself into the
sort of club that would not accept him as a member; he preferred to storm
the clubhouse with a pitchfork. One of Icahns oft-repeated bromides is that
the average C.E.O. is like a fraternity president: a nice guy to have a beer
with, but maybe not too bright.
Corporations, seeing Icahn coming, often tried to fight him off. His
reputation grew so fearsome that some companies paid him to go away by
buying his shares back at a premiuma practice known as paying greenmail.
Marty Lipton, a corporate lawyer whose firm has often been hired by
companies that were looking to thwart an Icahn takeover, wrote a memo four
years ago in which he described raiders like Icahn as engaging in a form of
extortion. In Liptons view, such investors create short-term increases in
the market price of their stock at the expense of long-term value. In the
nineties, when Icahn was fighting for control of Marvel Comics, the
companys C.E.O., a veteran of the Israeli Army, likened dealing with him to
negotiating with terrorists.
Icahn prefers to describe himself in more righteous terms, as a warrior for
stockholders who have been disenfranchised by inattentive corporate boards
and myopic executives. He sees himself as a champion of shareholder
rights, an advocate for the little guy. By going after lacklustre
management, he argues, he has generated billions and billions of dollars
for shareholders, while managing to make out just fine himself. Im like a
gunfighter you hire to save the town, he once remarked. That gunfighter is
there to do good. He knows hes on the right side, and hes proud of it, but
hell only do what he does if he knows hell get paid for it.
It is true that Icahn has increased the value of many companies that he has
invested in, but there are also numerous instances in which, in the
aftermath of a raid, he emerges as a winner and everyone else seems to lose.
In 1985, he seized control of the airline T.W.A. According to the Times,
Icahn celebrated by donning a T.W.A. flight jacket and strutting around his
office, exclaiming, Weve got ourselves an airline! He took the company
private, pocketing nearly half a billion dollars, then sold off its assets.
He also waged a bitter fight against the flight attendants union. 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 companys chief executive, described Icahn as one of the
greediest men on earth. T.W.A. eventually went out of business.
Like Trump, Icahn adheres to a simian dominance code in which every dealand
possibly every human interactionis a zero-sum contest. Only the alpha
prevails. Yet, among Trumps panoply of wealthy boosters, Icahn is
distinctive, if not unique, because of the Presidents willingness to play
the beta role and genuflect before him. When they met, during the eighties,
Trump was an eager supplicant, perhaps in part because Icahn really is what
Trump has always pretended to be: a genuine master dealmaker, and a
legitimately self-made man. Icahn started out with much less than Trump did,
and ended up with vastly more. In 1988, Trump paid eleven million dollars to
host a heavyweight title fight between Mike Tyson and Michael Spinks, at
Boardwalk Hall, in Atlantic City. Before the fight, Trump took Icahn
backstage to meet Tyson. The bout started late, and the announcer was
obliged to recite an attenuated roll call of famous guests, among them
Trumps good friend Carl Icahn.
Two years later, Trump unveiled the Taj Mahal, a spangled confection on the
boardwalk. It had been financed entirely with junk bonds, and by the time
construction was complete it was already imperilled by debt. When Trump
needed to make an interest payment on the loans, his father, Fred, sent a
lawyer to another Trump casino, the Trump Castle, to buy $3.3 million in
chips. Not long afterward, Trump was bailed out once againthis time by
Icahn. One of Icahns specialties is investing in distressed debt, and he
purchased the Tajs outstanding bonds at a steep discount. Rather than oust
Trump, Icahn negotiated with the other bondholders to allow Trump to retain
equity in the casino, as well as his place on the board. Years later, when
Trump named Icahn a special adviser, the Democratic National Committee
released a statement that alluded to the Atlantic City episode, suggesting
that the White House appointment was a quid pro quo twenty-five years in
the making. Icahn, however, had already been handsomely remunerated for his
investment: he sold the bonds, in 1993, for more than double what he had
paid for them.
Icahn and Trump maintained a loose friendship during the ensuing decades,
one that was hardly as intimate as Trump likes to make it sound. The very
notion of a relationship that transcends mercenary self-interest may be
alien to Icahn. Once, in a court proceeding, he said, If the price is
right, we are going to sell. I think thats true of everything you have,
except maybe your kids and possibly your wife.
Possibly? the judge asked.
Possibly, Icahn said, adding, Dont tell my wife. (Icahns first
marriage ended in an acrimonious divorce. He is now married to his former
assistant, Gail Golden, who manages his charitable interests.) When Oliver
Stone was doing research for his 1987 film, Wall Street, he paid a visit
to Icahn, and borrowed one of his observations for the character Gordon
Gekko: If you need a friend, get a dog. Trumps almost canine subservience
to the older financier is such that, for years, Icahn, who is a tennis fan,
has enjoyed droit-du-seigneur access to Trumps personal box at the U.S.
Open.
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. Its the
hottest brand in the country. But in Icahns opinion the only real downside
to shedding the Trump name was the expense that would be associated with
changing all the signage. Trump expressed dismay at Icahns slight, telling
the Times, in 2011, that he was a loyalist who prioritized friendship,
whereas with Carl the friendship stops where the deal begins. (Icahn
responded that he did not consider the two of them to be close, adding,
pointedly, that he had not been invited to Ivanka Trumps wedding.) In court
papers, Icahns lawyers suggested that Trumps name was no longer
synonymous with business acumen, high quality, and style. Icahn told the
Wall Street Journal, I like Donald personally, but frankly Im 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?
Even after Icahn started supporting Trumps Presidential run, he often
seasoned his praise with a dash of disdain. Im not here to say Donalds a
great businessman, he told the Washington Post. But I will say hes a
consensus builder. When Trump first announced his candidacy, in June, 2015,
he appeared on Morning Joe, and said, I would like to bring my friend
Carl Icahn into the government, suggesting that Icahn might make a good
Treasury Secretary. Icahn replied, in a post on his personal Web site, I am
flattered but do not get up early enough in the morning to accept this
opportunity.
When Icahn initially made a takeover bid for CVR Energy, in February, 2012,
the company hired Wachtell, Lipton, Rosen & Katz, the formidable New York
law firm, to deflect him. But Icahn prevailed, acquiring an
eighty-two-per-cent stake in the refiner. CVR had never built enough of its
own ethanol-blending facilities to comply with the Renewable Fuel Standard,
buying RIN credits instead. This was a bad bet. Up until 2013, the
conventional wisdom was that there would be no volatility in RIN prices,
Tristan Brown, a professor at the State University of New Yorks College of
Environmental Science and Forestry, who has studied the RIN market, told me.
But that year prices started to climb. The RIN market is much less
transparent than the stock market, and some players appeared to be hoarding
credits, which drove up their price. Icahn worried that CVRs competitors,
knowing that the company was in trouble, were deliberately manipulating the
price, subjecting his refiner to a so-called short squeeze. (Icahn is no
stranger to this tactic, having attempted to put a short squeeze on the
investor Bill Ackman by driving up the price of Herbalife, a stock that
Ackman was betting against.)
During the 2016 Presidential campaign, Icahnwho owns twenty or so companies
and has investments all over the worldraised the issue of renewable-fuel
credits at every opportunity, speaking of the insane perfidy of the E.P.A.
and the plight of his refiner. This is something that Carl does, a former
Icahn employee told me. He becomes fixated on something, even something
that represents a small part of his portfolio. He gets obsessed.
Trumps bid for the Presidency may have seemed like a long shot, and Icahn
professed to have misgivings about the negativity of his chosen candidate.
But he believed that Trump would slash regulation and, specifically, would
make the change that Icahn wanted on biofuel creditsshifting the so-called
point of obligation so that other parties, closer in the supply chain to
the gas pump, would be compelled to purchase RIN credits, instead of
merchant refiners like CVR.
Even if Trump was elected, there were reasons to believe that Icahns
objective might be difficult to achieve. The ethanol industry opposed
shifting the point of obligation, and was represented by experienced
lobbyists. In August, 2016, Bob Dinneen, who runs a leading ethanol trade
group, the Renewable Fuels Association, told the Houston Chronicle that the
Renewable Fuel Standard functions basically as it should, providing
incentives to refiners that blend ethanol and penalizing those which do not.
Changing the regulation, Dinneen said, would simply reward folks who
havent done what the law said they should do.
The Renewable Fuel Standard had passed with support from an improbably
diverse coalition: environmentalists, who wanted to curb greenhouse-gas
emissions; national-security hawks, who wanted to reduce reliance on foreign
oil; and farm-state lawmakers, who wanted to boost the corn industry. (Most
ethanol is made from corn.) Senator Chuck Grassley, the Iowa Republican,
opposed shifting the point of obligation. So did the American Petroleum
Institute, one of the most powerful lobbying groups in Washington, because
some integrated oil giants, such as BP and Shell, were now producing so much
blended fuel that they were generating surplus credits, which they sold to
smaller refiners like CVR. Because the petroleum industry and the ethanol
industry tend to see in one another an existential threat, there are few
policy issues on which they agree. The point of obligation for RIN credits
is one of them.
This daunting array of forces only intensified Icahns ire, reinforcing his
sense of himself as an aggrieved outsider. In his open letter to the E.P.A.,
he fumed that the RIN market was rigged, giving Big Oil a windfall at the
expense of smaller refiners such as CVR. Without a policy change, he warned,
the regulation would soon bankrupt small and mid-sized refiners, creating a
Big Oil oligopoly that would cause gas prices to skyrocket.
Whatever sympathy Trump may have felt for Icahns predicament, he had an
important interest of his own: he needed states like Iowa on his side in
order to win the Presidency. At a June, 2016, rally in Cedar Rapids, he
pledged his support for the Renewable Fuel Standard, and promised to save
the ethanol industry, which was under siege.
That September, however, something curious happened. The Trump
campaignwhich had not distinguished itself for the wonky exactitude of its
white papersissued a fact sheet on economic policy that, amid generic
promises of unbridled economic growth, contained a surprisingly detailed
bullet point about the E.P.A.s RIN program. These requirements have turned
out to be impossible to meet and are bankrupting many of the small and
midsize refineries in this country, the passage read. These regulations
will give Big Oil an oligopoly. This did not sound especially like Donald
Trump. It did sound a lot like Carl Icahn. When the press asked whether the
fact sheet signalled Trumps intention to adjust the ruleat the risk of
inflaming Corn Belt votersa spokesman responded that an incorrect version
of the fact sheet had been posted. The bullet point disappeared.
As an investor, Icahn likes to zig where others zag. It is not clear how
much confidence he had in Trumps prospects in 2016, or whether, on Election
Night, he was as surprised as the rest of the country. But Icahn attended
the impromptu victory party at the Hilton in midtown, where nobody seemed to
have arranged for balloons, though a cake had been fashioned into a bust of
a scowling Trump. Supporters wearing Make America Great Again hats
celebrated, in a daze. Icahn left the party after midnight. The global
markets were tanking on the news of Trumps win, so he went home and made a
billion dollars worth of investments.
Within days of the victory, according to people familiar with the situation,
Trump had enlisted Icahn to help him staff major government agencies. Icahn
employees began reviewing the references and résumés of potential Cabinet
appointees. It has frequently been remarked that Trump has stacked his
Administration with plutocrats. Less often acknowledged is the degree to
which many of these appointments bear Icahns fingerprints. On November
15th, Icahn tweeted, Spoke to @realDonaldTrump. Steve Mnuchin and Wilbur
Ross are being considered for Treasury and Commerce. Both would be great
choices. He added, Both are good friends of mine but, more importantly,
they are two of the smartest people I know. Two days later, Icahn told the
Fox Business Channel that he had just had dinner with Mnuchin, and had
urged Donald to consider him. He continued, Im not going to be the one
to announce it, but I do believe he will get the job. On November 30th,
Mnuchin did.
When potential Cabinet secretaries visited Trump Tower to meet with the
President-elect, they were sometimes sent for a second interviewwith Icahn.
On the day that Jay Clayton was announced as Trumps choice to head the
Securities and Exchange Commission, he stopped by Icahns office for a
meeting. Appearing on CNBC in December, Icahn defended his role as a talent
spotter for the Trump Administration. Over the years, you develop instincts
for picking the right C.E.O., he said. Is there anything wrong with me
saying, This guy is the right guy for this job at this time? It doesnt
mean Donald is going to take my advice, necessarily.
When Scott Pruitt visited Trump Tower to discuss the top job at the E.P.A.,
the President-elect concluded the interview by instructing him to walk two
blocks uptown to meet with Icahn. Trump, according to a Bloomberg News
account, told him, He has some questions for you. Pruitt was precisely the
sort of candidate that Icahn might favor. A fierce opponent of environmental
regulation, Pruitt had spent years, as the attorney general of Oklahoma,
suing the agency that he was now in talks to oversee. Even so, Pruitt knew
that Icahn would likely want to discuss one particular issueRIN creditsand
as Pruitt and an aide headed up Fifth Avenue they searched the Internet for
information on the credits system and its impact on Icahns refiner.
Pruitt was nominated on December 8th. The next day, Icahn said in an
interview with Bloomberg News, Ive spoken to Scott Pruitt four or five
times. I told Donald that he is somebody who will do away with many of the
problems at the E.P.A. He continued, I do think he feels pretty strongly
about the absurdity of these obligations, and I feel that this should be
done immediately. One reason that the RIN market is so unstable is that the
price of the credits is extremely sensitive to developments in the news that
might affect their future value. On the day that Pruitt was appointed, the
price of RINs plungeda welcome outcome for Icahn, because it would cost CVR
less to purchase the credits that it needed to fulfill its regulatory
obligation.
On December 22nd, the day after Icahn was formally declared to be an adviser
to the President, RIN prices dropped again. It was hardly lost on Wall
Street that the famously single-minded investor might leverage his new role
to advocate for his own investments. Barrons asked, Has Carl Icahn been
appointed Secretary of Talking His Own Book? The Web site Dealbreaker,
noting Icahns lack of conflict-of-interest constraints, proposed an
alternative job title: Secretary of Do Whatever the Fuck You Want.
All Presidents seek advice from the private sector. Sometimes they have done
so informally, as when Bill Clinton made late-night phone calls to a
kitchen cabinet of business leaders. On other occasions, an Administration
has brought executives into the bureaucracy on a part-time basis, making
them so-called Special Government Employees, which requires certain
divestments and disclosures. Between these informal and formal models lies a
third option: Presidents often establish outside advisory boards of
corporate leaders; in such situations, the business leaders are not expected
to give up any of their holdings, and may advocate on behalf of their
industries without having to register as lobbyists. Icahn has likened his
sinecure to this type of arrangement, saying, Im not making any policy. I
am only giving my opinion.
For any executive, having access to the Oval Office can be good for
business. In a new research paper, All the Presidents Friends, the
University of Illinois finance professors Jeffrey R. Brown and Jiekun Huang
studied the share prices at companies whose executives visited the White
House, and found that the real, or implied, influence of such encounters
boosted the value of the companies in the months after such visits. Jimmy
Williams, Icahns former lobbyist, told me, Can Carl Icahn take his
influence with the President and make deals that benefit him? Any C.E.O. who
has a relationship with the President can do that, regardless of party.
Brown and Huang were able to write their paper only because the Obama White
House made public its visitor logssomething that Trump has refused to do.
Without such information, it is impossible to know which executives are
meeting with the Trump Administration at the White House. And the kind of
outside panels that Icahn considers to be similar to his role are subject to
the Federal Advisory Committee Act, which mandates that their meetings must
be held in public. Austan Goolsbee, who served as the chairman of Obamas
Council of Economic Advisers, told me, The Obama Administration established
clear disclosure and full transparency about what advice people were giving
and when they were giving it. You can be an outside adviser or a government
employee. The rules are clear for each. With Icahn, they seem to be trying
to invent a kind of Guantánamo Bay situation, in which youre simultaneously
both and neither.
Norm Eisen, who served as Obamas Special Counsel for Ethics and Government
Reform, argues that Icahn is not just an outside kibbitzer but a formal
adviser who should be subject to constraints. He gets a title, Eisen said.
He gets a broad policy portfolio. Hes involved in personnel decisions, in
policy discussions. To me, all of that adds up to him being a Special
Government Employee. The blitheness with which Icahn and the Trump White
House sidestepped the federal requirements is evidence, Eisen contends, that
this is a lawless Administration. Immediately after Icahns appointment
was announced, shares in Icahn Enterprises surged. Forbes estimated that his
stake in the company rose in value from $6.8 billion to $7.3 billionan
increase of five hundred and ten million dollars, in a day.
In early February, Icahn contacted Bob Dinneen, the head of the Renewable
Fuels Association. Icahn proposed that they meet to discuss Dinneens
opposition to shifting the point of obligation for RINs. Dinneen took the
train from Washington to New York and went to the offices of Icahn
Enterprises. Icahn, as a younger man, hopped on planes to visit companies he
was investing in, but now he mostly has people come to him. His offices are
full of reminders, as if arranged by a set decorator, that Icahn is a
conqueror: the walls are lined with oil paintings depicting famous battles,
as well as framed stock certificates and other trophies from companies that
he has subdued. A pair of antique duelling pistols adorn his desk.
Icahn is known for his stamina and deviousness as a negotiator. Connie
Bruck, in her 1988 book, The Predators Ball, describes his passion for
all-night negotiation sessions, and notes that some of his interlocutors
suspect that he deliberately prolongs these encounters, not just as a tactic
but because he is having such a good time. Icahn is a serious chess
player; as a young man, he considered becoming a chess master but decided
not to, because there was no money in it. He paid his way through Princeton,
in part, with poker earnings, and he has played the game with Leon Black,
the founder of Apollo Global Management; Sam Waksal, the ImClone founder,
who went to prison for insider trading; and the onetime junk-bond king
Michael Milken, who has also done time for white-collar crime. Waksal,
Milken, Ivan Boesky, the former Icahn employee said. Carl has never got
into trouble. But hes played with everyone who did. In his business
dealings, Icahn is a master of the bluff. Carl views the legal norms as a
starting point for a negotiation, rather than a moral compass, a financier
who has faced off against him told me. Hes not afraid to cross the line if
he thinks hes on firm ground. Perhaps the law says that this is wrong. But
I know better, and I am willing to sue or be sued. Its a rare breed of
person who will do that. Carl lives in that breach.
On February 27th, the news leaked that Dinneen and Icahn had struck a deal:
the Renewable Fuels Association would end its long-held opposition to
changing the point of obligation, and side with Icahn in his push to shift
the obligation away from refiners like CVR. This was a surprising
development. There had been no ambiguity about Dinneens position, and
earlier that month the Renewable Fuels Association had made a submission to
the E.P.A. objecting to such a change. What was behind this abrupt reversal?
Some speculated that Dinneen had been influenced by Valero, a refiner whose
biofuels subsidiary had recently joined his association, and which had sent
a representative to join Dinneen at his meeting with Icahn. Like CVR, Valero
had not sufficiently invested in blending infrastructure and was spending
huge sums on RIN credits. But, after reporters hounded Dinneen, he offered a
different explanation: in a statement, he explained that he had received a
call from an official with the Trump Administration, informing us that a
pending executive order would change the point of obligation. In other
words, the policy was going to change by Presidential fiat, whether the
industry liked it or not. I was told in no uncertain terms that the point
of obligation was going to be moved, Dinneen said. The executive order
would be non-negotiable.
Confronted with this fait accompli, Dinneen apparently felt that his only
option was to secure whatever concessions he could for his industry. One
long-standing priority for Dinneen and other biofuel advocates has been to
change laws so that gas blends containing fifteen per cent ethanol can be
sold year-round. (Such blends cannot legally be sold during the summer, the
peak driving season; Dinneen contends that the prohibition, meant to
alleviate smog, is outdated.) So Dinneen pressed for that adjustment, in
exchange for his acquiescence on the point of obligation.
Many ethanol-industry watchers I spoke with were flabbergasted by this turn
of events. When I called Dinneen, he told me that the only Trump
Administration official he had been speaking with was Icahn. Im
old-school, Dinneen said. If I get a call from a special adviser to the
President, Im going to take it. Dinneen explained that although Icahn
never said explicitly that he was speaking on behalf of the President, he
did say that he had discussed the point of obligation with Trump, and that
he was confident that a change in policy was coming soon. Normally, Dinneen
pointed out, any negotiation between the government and private industry
would take place with an army of people assembled on opposite sides of a
conference table: a phalanx of lawyers, technical specialists, and other
advisers. This was different. Then again, he noted, with a dry chuckle,
This whole town is different now. Now he was cutting deals, mano a mano,
with Icahn: a friend of Trump, the owner of a refiner, and a special adviser
to the President. If this was the new reality, Dinneen figured, he needed to
find a way to work with it. To do otherwise would be malpractice, he said,
adding, Icahn had a title I couldnt ignore.
Dinneen insisted to me that he and Icahn never struck a conclusive deal;
they simply came to an agreement that he would propose to his board that the
association end its opposition to shifting the point of obligation. But,
after a phone call with Dinneen on February 23rd, Icahn spoke with the
President and relayed the substance of this agreement. Icahn, who had been
out walking his dog, talked to Trump from the lobby of his apartment
building. Bloomberg News later reported that, according to Icahn, Trump
seemed receptive. Trump instructed Icahn to telephone Gary Cohn, his senior
adviser on economic issues. Cohn handed the matter to an aide on the
National Economic Council, a former oil lobbyist named Mike Catanzaro, who
spent an hour going through the details with Icahn. When, four days later,
Bloomberg News broke the story that an executive order was imminent, corn
and gasoline prices went berserk.
It was not hard to believe that the Trump White House had shifted policy at
the behest of an industry crony. The Administration had devoted itself, in
its early days, to dismantling the regulatory state, in close consultation
with business interests. The White House established deregulation teams at
various federal agencies. Administration officials have refused to disclose
the names of team members, but reporting by ProPublica and the Times
suggests that many of them have come from the regulated industries
themselves.
Efforts at health-care reform, an infrastructure bill, and tax cuts have all
stalled, stymied by the infighting, indiscipline, and incompetence of the
Trump Administration. But deregulation has been a quiet success, and nowhere
more so than at the E.P.A. Pruitt has not made it a habit to meet with
senior career officers at the agency; he does, however, meet regularly,
behind closed doors, with industry executives. Some observers fear that the
E.P.A. is now run like a Senate office, where representatives meet with
constituents and do constituent servicesexcept that the constituent is
industry. For example, under the Obama Administration the E.P.A. moved to
ban chlorpyrifos, a pesticide manufactured by Dow Chemical, after agency
scientists found that it caused neurodevelopmental damage in children. Dow
lobbied against the ban, and Pruitt recently tabled it, citing uncertainty
about the scientific evidence that it is hazardous to kids.
Icahn could scarcely have asked for a more business-friendly figure at the
E.P.A. But, when news leaked about a policy shift on the point of
obligation, the ethanol industry protested. Jeff Broin, the C.E.O. of Poet,
a large ethanol producer, complained, This was a back-room deal made by
people who want out of their obligations. One group, Fuels America,
declared that Dinneens Renewable Fuels Association was no longer aligned
with Americas biofuel industry, and severed ties with it. Emily Skor, who
runs Growth Energy, another trade group, objected that Dinneen had been
negotiating without consulting other stakeholders in the ethanol industry.
This is no deal for anyone but Carl Icahn, she said. Senator Joni Ernst,
of Iowa, also derided the deal, pointing out that it would benefit only a
select few.
On February 28th, Kelly Love, a spokeswoman for the White House, denied that
there was any plan to shift the point of obligation, telling Reuters, There
is no ethanol executive order in the works. In an interview with Bloomberg,
Stefan Passantino, the White House lawyer in charge of ethics and
compliance, questioned any characterization of Icahn as a government
official, saying, He is simply a private citizen whose opinion the
President respects and whom the President speaks with from time to time. In
subsequent conversations with industry representatives, Pruitt distanced
himself from Icahns efforts. Two people who spoke with Pruitt in the
aftermath of the news reports about the executive order told me that he had
assured them, I was not consulted on this.
Brooke Coleman, the executive director of the Advanced Biofuels Business
Council, pointed out to me that these events unfolded just a month into the
Trump Administration. Many staffers had not arrived yet, and there was no
real policymaking apparatus. The point-of-obligation rule was a relatively
obscure agenda item, a top priority for almost nobody but Icahn. This was a
middle-of-the-night quick strike, Coleman said. In the middle of the
night, Icahn said, Sign this. But it didnt work. He got caught. Those
were heady times for executive orders, with the President seeming to sign a
new one each day. But several people told me that the point-of-obligation
change could not have been made simply by executive prerogative. Its a
regulation, Janet McCabe said. So the regulation would have to be changed,
and there is a whole process for that. In 1946, the Administrative
Procedure Act established a protocol for rule-making that involves
interagency coördination and input from interested parties.
Icahn was always talking about an executive orderthat was his
vernacular, Dinneen recalled. An official in the Trump Administration told
me that reports about an impending executive order were not true, because
there was no organic executive-order process that would be normal for
something like that. There was a draft executive order, the official
acknowledged, but it did not originate in the White House: It was something
Icahn sent to us.
Icahn is very sophisticated, Brooke Coleman said. But maybe not about
Washington. Senator Chuck Grassley not only represents corn growers; he
also chairs the Judiciary Committee, which helps confirm Trumps
appointments of judges. This is the reason that traditional policy
negotiations are so overcrowded. Washington is a city of vying
constituencies, many of which happen to be very powerful. Coleman believes
that someone probably walked into Trumps office and said, Heres why you
need Chuck Grassley more than you need Carl Icahn.
Did Icahn think that he could bluff his way to a change in federal
regulation? One thing is clear: whatever the White House might say, Dinneen
believed that Icahn was negotiating on behalf of the Trump Administration.
Icahn has boasted to associates in New York about his access to the
President. On March 1st, in a filing to the Securities and Exchange
Commission, Icahn Enterprises made a point of mentioning that Mr. Icahn is
currently serving as a special advisor to President Donald J. Trump on
issues relating to regulatory reform. Such a disclosure could indicate
merely that Icahn is being transparent with his shareholders. But it is
also, unequivocally, a signal: I have the ear of the President.
Richard Painter, who served as the chief ethics lawyer for George W. Bush,
told me that it was irrelevant whether or not Icahn received a salary or had
an office in the West Wing. When you give someone a title, you make him
your agent, Painter said. He pointed out that Icahns title stood out amid
the arid nomenclature of official Washington, where special advisers
proliferate but only a chosen few can append the words to the President.
With a title like that, he has the authority to represent the Presidents
views. If he goes out and says The President thinks this, that means
something.
If Icahns objective was to shift the point of obligation, his bluff failed.
This would appear to be an instance in which the same lattice of vested
interests that can cause dysfunction in Washington actually led to a proper
result; it prevented a hasty change in policy that was designed primarily to
assist one person. The process worked, at the end of the day, the Trump
Administration official told me. We made the right decision.
Mark Stevens, Icahns biographer, recalled, Carl once told me, I dont
believe in the word fair. Its a human concept that became conventional
wisdom. To Icahn, it may have seemed that the roadblocks he faced were
not a sign of a sound bureaucracy but, rather, evidence of a power play by
more formidable special interests, in the form of the ethanol lobby and Big
Oil.
But Icahns first foray as a Presidential adviser was by no means a complete
failure. Icahn had spent the second half of 2016 complaining bitterly about
CVRs obligation to buy RINs. But, when CVR released an earnings report in
April, 2017, it emerged that the company had actually been selling them.
Reuters subsequently reported that, when the price of RINs was high, CVR
sold millions of the credits. The company would eventually need to turn over
its quota of credits to the E.P.A., yet in the months before its annual
deadline it was quietly selling them off. This was extremely unusual. To my
knowledge, this is the first time you had someone taking a short position in
the RIN market, Tristan Brown, the SUNY professor, told me.
To short a stock or a commodity is to make a bet that the price will drop.
And in this instance it was extremely risky: if the deadline arrives and a
refiner does not have the required quota of credits, the E.P.A. can enforce
fines of $37,500 a day for each RIN owed until the refiner compliesa figure
that would climb into the billions of dollars immediately. Youre
essentially gambling, Brown said. And, if youre wrong, the penalty is
pretty much unlimited. This was, Brown said, not the sort of speculative
play one might anticipate from a mid-sized refiner like CVR. Rather, it was
the kind of gamble that a bold Wall Street investor might make.
In the near term, at least, Icahns bet paid off. As soon as the news broke
that an executive order on the point of obligation was imminentand that
Icahn and Dinneen had reached a dealprices of RINs plummeted. Jim Stock, a
professor at Harvard who studies the energy sector, pointed out that if an
individual has influence over expectations in this market, he can end up
moving prices. When RIN prices dropped, it afforded CVR an opportunity to
cover its short, buying back the RINs it needed to meet its regulatory
obligation at a steep discount.
Because CVR will not comment on the trades, it is impossible to know how
many credits were bought during this period. Normally, the refiner posted a
loss for the sum that it spent on RINs each quarter, and those losses had
lately amounted to as much as sixty million dollars. But, on a shareholder
call in April, a CVR representative said that in the first quarter of the
Trump Administration the company had experienced a negative loss of six
million dollarsthat is, a profit. Tristan Brown told me that the notion of
a profit resulting from compliance with the Renewable Fuel Standard was
unheard of for a merchant refiner like CVR. When I asked a longtime RIN
trader about this gambit, he said, Either Icahn was extremely lucky or he
knew something that other people didnt.
So, what are you doing? Icahn asked me when I called him for this story.
For all his brusque qualities, Icahn is an engaging interlocutor, his voice
a raspy staccato, his accent a time capsule of old New York. In the course
of three phone calls, we spoke for nearly four hours. Icahn has given
hundreds of interviews over the decades. He is a great raconteur. But, on
the subject of his role as an adviser to Trump and his effort to change the
E.P.A. regulation, he preferred to talk almost entirely off the record. A
lawyer joined him for each call. Icahn insisted to me that he does not
oppose all regulation, and feels, for example, that some Wall Street
regulation is necessary. Notwithstanding the title that Trump had conferred
on him, Icahn described his advisory role as unofficial, and said, I have
only ever made suggestions that I believed would benefit all companies in
particular industries, never any one particular company. Beyond that, he
would say little on the record.
Icahn was less guarded when his appointment originally generated
controversy. I own a refinery, he told Bloomberg News, in March. Why
shouldnt I advocate? He later added, I have a right to talk to the
President like any other citizen. . . . And, yeah, it helps me. Im not
apologizing for that. With me, he was more calibrated, insisting that his
role has been overstated, and that he has spoken to Trump only a handful
of times since the election.
Confronted with Dinneens account of their interactions, Icahn deferred to
his lawyer, Jesse Lynn, who disputed several points. Although Dinneen was
adamant that Icahn had assured him an executive order was in the works, and
had spoken of discussing the matter with Trump, Lynn told me that Icahn had
merely expressed hope that Trump would come around to his view. Lynn also
denied the White Houses account, maintaining that the draft executive order
was not prepared by Icahn.
I spoke to someone who has seen the draft executive order, and he told me
that it looked conspicuously like something that had been prepared by
someone with no experience in Washington: It was like I, the President,
instruct Scott Pruitt to move the point of obligation. It was almost
amateurish. Any policy person or lawyer would understand that this thing was
never going to fly.
Several sources in Washington who have discussed the matter with Mike
Catanzaro, the Trump Administration official who dealt with Icahn, told me
that, once he and Gary Cohn had concluded that Icahn was attempting to
hijack the policy process, they put a stop to it. One of the sources said,
I think Icahn thought if he told his pal Don, This is a bad thing, and
explained why it was stupid, Don would say, God damn it, Carl, youre
right!and then the law would change. Thats not how it works down here. We
have this thing called the Administrative Procedure Act. Another source
said, Mike had to make clear that the government is not a vending
machinethat its not here to profit the Presidents friends. He added,
Not everybody in this Administration necessarily sees it that way.
Icahn would not acknowledge having directed CVR to short RINs. Jesse Lynn
said that CVRs strategies on RINs are decided by its board of directors.
(He did not mention that the chairman of the board is Icahn.) On the
question of whether Icahn had exploited his proximity to the President to
make bets in the marketplace, Lynn said, Any suggestion that we had access
to information that others didnt is unequivocally false. Neither Icahn nor
Lynn would comment further on the trading of RINs, but Icahn told me, I
have a decades-long, impeccable record of creating literally hundreds of
billions of dollars of value for shareholders. Ive lived through many
turbulent times but Ive never had any problems with the government. He
added that he has a great respect for the law, and that he and his
associates cross every t and dot every i in our activities.
These assurances notwithstanding, Icahn could be in legal jeopardy. Hes
walking right into possible criminal charges, Richard Painter, the Bush
Administration ethics lawyer, said. He cited a federal statute that makes it
illegal for executive-branch employees to work on any matter in which they
may have a direct financial interest. The President and the Vice-President
are exempted from this statute. Unpaid White House advisers are not. Painter
suggested that the public-integrity division of the Justice Department
should be investigating. If I were Icahns private lawyer, I would tell him
that he shouldnt have accepted the special-adviser title, he said. Jesse
Lynn told me that he has reviewed the relevant law, and that it does not
apply to Icahn: Unlike a government employee, Mr. Icahn has no official
role or duties and he is not in a position to set policy.
Painter disagrees. That is clearly an official title, he said. If he was
advising on a matter where he had an interest, then Icahn was in direct
violation of the criminal statute.
The Trump Justice Department may be unlikely to initiate an investigation.
But Eliot Spitzer, the former prosecutor and New York governor, told me that
Icahns activities in Washington should also draw scrutiny in New York. At
a minimum, it looks improper, he said. If I were sitting downtown at 120
Broadway, where I used to be the state attorney general, and somebody
presented this fact pattern to me, I would say, Lets take a hard look at
this. Giving policy advice as a formal government adviser while at the same
time trading on the potential impact of that advice violates our notions of
transparency in government work. It seems problematic on its face.
In March, Icahn published an article in The Hill, defending himself against
any suggestion that, as a private citizen lobbying the Administration on
behalf of his own business interests, he might be expected to register as a
lobbyist. I have vetted my activities with a number of lawyers and it is
clear that no registration is required, he wrote. He argued that it was not
merely refiners like CVR that were suffering under the current point of
obligation; so were mom-and-pop gas stations, many of which were minority
owned. Icahn argued, with a straight face, that he was actually fighting
this battle on behalf of minority communities. The investor who has
negotiated with Icahn told me, Carl confuses the personal good and the
social good in a very profound way.
Following the reports that Icahn was negotiating with Dinneen and urging
Trump to shift the point of obligation, Icahn acknowledged, in March, that
he had not been buying RINs. Jesse Lynn insisted that there was nothing
unusual or inappropriate about any RINs trading that may have been
conducted. Icahn had no ability to influence policy at the White House,
Lynn insisted. All that his title and his relationship with the President
afforded was an opportunity to express his views.
One recurring feature of the Trump Presidency has been an acute collective
sensation, shared by a substantial portion of the electorate, of helpless
witness. Dismayed Americans wait, like spectators at a game that has turned
suddenly dangerous, for a referee to step in and cry foul. But one reason
that Trumpism is so transfixing to watch is that it is about the upending of
norms, the defiance of taboos, the destabilization of institutions. Schools
out forever. What this means in practice is a serious deficit of
accountability. Whom can you call when the authorities are the ones breaking
the rules?
Since Icahns appointment, Senators Elizabeth Warren, of Massachusetts, and
Sheldon Whitehouse, of Rhode Island, along with several of their Democratic
colleagues, have written a string of letters to the White House and to
various agencies to protest the nature of Icahns role, and to seek clarity
on the question of what he has actually been doing. Whitehouse told me that,
because of the definitional murk surrounding Icahns appointment, it is
important to answer a series of baseline questions. How often has he
consulted with Trump or others at the White House? Has his position provided
access to confidential government information that might affect his
investments? How broad an array of regulations has Icahn offered advice on,
and how have his recommendations dovetailed with his own portfolio?
I asked several people who know Icahn whether he even has policy interests
beyond his own investments. They noted Icahns commitment to educationhe
has built eight charter schools in the Bronxbut struggled to offer other
examples. Someone who used to work for Icahn told me, Carl has zero
interest in the details of regulation. He has a general feeling that he
doesnt want regulations to affect him, but its not like hes going to be
consulting the Federal Register and making policy recommendations. Its
ludicrous. When a Bloomberg reporter pressed Icahn about sectors beyond oil
refining where he felt that regulation was excessive, he spoke of railcars
and liquid natural gastwo heavily regulated industries in which Icahn has
extensive holdings.
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 letterJay
Clayton and Scott Pruitthad 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 onan 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.
In the absence of disclosures about what Icahn has and has not advised on,
any investment that he makes in a regulated industry can come to seem
suspicious. In February, he acquired a stake in the pharmaceutical giant
Bristol-Myers Squibb. During Jay Claytons confirmation hearings, Elizabeth
Warren noted that Icahn had made this move after assuming his role as a
special adviser to the President. The value of a company like Bristol-Myers
would be affected by Food and Drug Administration decisions, patent
determinations, and policies that affect Medicare and Medicaid, she pointed
out. It is almost impossible to imagine, she argued, that Icahn did not
have some inside information about how these policies would affect a
company like Bristol-Myers. Warren posed a hypothetical to Clayton: If
Icahn had inside information about federal regulatory policy that would
affect Bristol-Myers, and he chose to buy shares in the company based on
that information, would that not be a violation of securities laws?
Clayton demurred, saying that it would depend on an analysis of the facts
and circumstances.
We are talking about an Administration that just has conflicts everywhere,
Warren pressed. It is very difficult to determine whether someone is
actually working in the interests of the American people or they are just
lining their own pockets. The public should not be forced to guess
whether its government is serving its interests or that of the Presidents
cronies, she continued. And when Carl Icahn is influencing policy that will
affect companies and then he is investing in those companies . . . that
creates a conflict of interest that is just beyond what we are even talking
about everywhere else.
In his conversation with me, Icahn expressed indignation about the effort to
hold him accountable, which he has described, in conspicuously Trumpian
language, as fake news and a witch hunt. He told me that any criticism
of his role is both politically motivated and motivated by certain large
business interests, and is completely without merit.
When I asked Icahn about the nature of his special-adviser role, he
maintained that what had initially appeared to be a broad policy portfolio
was, in practice, much more limited. The only suggestions I have ever made
throughout this whole period were on the RINs issue, he said. No railcars?
No liquid natural gas? Icahn says that he has not had a single conversation
with anyone in the Administration about regulations in these industries, or
in any others in which he has holdings. He acknowledges advocating on the
RINs issue. But he maintains that this was not problematic, because, though
the refiner he owns might benefit from a shift in the point of obligation,
it would not be the only company that would welcome such a change. In
Icahns telling, this makes him practically disinterested.
The White House official who would, in theory, police Icahns status is
Stefan Passantino, the deputy counsel to the President for compliance and
ethics. Passantino was responsible for counselling Kellyanne Conway, the
Presidential adviser, after she sparked an outcry by promoting Ivanka
Trumps apparel line during a Fox News interview. In the view of Trump
Administration officials, Passantino laid to rest the Icahn controversy with
his February declaration that Icahn was simply a private citizen. Kelly
Love, the White House spokeswoman, said, Mr. Icahn does not have a position
with the Administration, nor a policymaking role.
It is ironic for Passantino to rule on the controversy surrounding Icahns
conflicts of interestbecause Passantino has a conflict of his own. On June
28th, Walter Shaub, the head of the Office of Government Ethics, wrote a
letter pointing out that Passantino, in his mandatory disclosures as a
full-time White House employee, noted that before joining the Administration
he had been a corporate lawyer. He listed the clients for whom he had done
work in the two years prior to joining the government. One of them was
Icahn. At the time that Passantino was initially queried about the propriety
of Icahns position, he made no mention of this relationship.
Two weeks after Shaub sent his letter, he resigned, saying that he could no
longer meaningfully perform the function for which the Office of Government
Ethics was designed. Shaub warned that the United States was facing a
historic ethics crisis. The White House released a statement lashing out
at Shaub, dismissing his concerns as grandstanding.
For all of President Trumps fulminations about the danger of leaks, his
White House has a bizarre habit of authorizing spokespeople to talk with the
press on the condition that their names not be mentioned. When I asked the
White House for an interview with Passantino, to discuss how he had vetted
Icahns position, a spokeswoman replied that Passantino had been recused on
any matters related to Carl Icahn, because Icahn was a former client. This
was the first I had heard of any recusal, and I asked when it had happened.
On the first day of the Administration, the spokeswoman replied.
If the White House spokeswoman was correct, then at the time that Passantino
issued the Administrations judgment that Icahns role posed no ethical
conflicts he was already recused from offering legal advice on precisely
that question. Thats not how recusal works, Shaub told me. Recusing
yourself means not delivering the White Houses legal theories about whether
Icahn is an employee. The spokeswoman maintained that, when Passantino made
his declaration, he wasnt making a legal judgment, but merely reiterating
a fact. Richard Painter, who used to hold Passantinos job, told me that
the White Houses repeated assertion that Icahn is simply a private citizen
is bogus, adding, The ethics shop in this White House is not very good.
If Passantino never weighed in on the terms of Icahns unusual appointment,
surely some other White House lawyer looked into the matter. I asked who
that was. The spokeswoman responded that it wasnt necessary to perform
any such legal vetting of Icahns role.
For the moment, Icahns push on the point of obligation appears to have
stalled. But, in July, CVR announced its most recent quarterly results, and
once again the firm was spending a great deal of money to purchase RINs. On
a call with investors, CVRs chief executive, John Lipinski, cited the
volatility of RIN prices. When theres news in the market, it goes up and
it goes down, he said. Lipinski complained, several times, about
speculators who were manipulating the price of the credits. When he was
asked about CVRs own speculative trading of RINs, he said that he didnt
intend to go into any detail on such questions. RIN prices, which hit a
low of thirty cents following the news of Icahns deal with Dinneen, have
since tripled. In the coming weeks, the E.P.A. is expected to issue a formal
rejection of proposals to shift the point of obligation. According to
Reuters, some investors on Wall Street are now betting against Icahnby
shorting CVR stock.
Dinneen, for one, does not anticipate that Icahn will simply let the issue
go. He doesnt seem like a man who will quit easily, he said.
Jeff Hauser, who runs the Revolving Door Project, a nonprofit focussed on
government corruption, told me that Icahns relationship with Trump is a
particularly bald example of a kind of clientalist politics that has been
more typical, historically, of banana republics, but which is on the rise in
the United States. Once there is an acquiescence that this sort of
corruption is acceptable, then you just see the demise of representative
government, Hauser said. We will essentially become a feudal state, with
people creating their own fiefdoms and extracting rents from the public.
On August 14th, I asked the White House to confirm that Icahn was still a
special adviser to the President. The spokeswoman e-mailed me back: Icahn
is NOT a special adviser to the president for regulatory reform. This
was certainly news. In my conversations with Icahn and his lawyer, I had not
developed any impression that his status had changed. Was the Administration
cutting him loose?
I wrote back to the spokeswoman, asking when Icahn had been let go. She
replied, There was no effective end date, because there was never a
formal appointment or title after January 20. This was transparently false;
Icahn had been named a special adviser to the President, not to the
President-elect. On March 1st, Icahns company told the S.E.C. that he was
currently a Trump adviser. And why had the White House lawyer, Stefan
Passantino, recused himself on January 20th from any matters related to
Carl Icahn if, as of that very day, Icahn had no role in the
Administration?
Instead of simply breaking off a questionable liaison, the White House seems
intent on going further, insisting that the liaison never happened in the
first place. But, in the event that state or federal investigators do
examine the legality of Icahns role in the early days of the Trump
Administration, this heedless revisionism is unlikely to withstand scrutiny.
After all, if Icahn had really been dismissed on the first day of the
Administration, it might have behooved the White House to tell Bob Dinneen,
or the senators who wrote all those letters. Or Icahn.
On Friday, August 18th, four days after the White House disavowed Icahn to
me, he tweeted, Today, with President Trumps blessing, I ceased to act as
special advisor to the President on issues relating to regulatory reform.
In a letter posted to his Web site, Icahn explained that he had spoken with
Trump that day. His resignation came during a week when numerous
private-sector advisers distanced themselves from Trump, in response to his
equivocal comments in the aftermath of a white-supremacist rally in
Charlottesville. But Icahn made no mention of these events, claiming
instead, I chose to end this arrangement, and citing the insinuations of
a handful of your Democratic critics. He insisted, I never had access to
nonpublic information or profited from my position, nor do I believe that my
role presented conflicts of interests.
In our conversations, Icahn was unfailingly polite about President Trump.
But it struck me that it must vex him that Trumpthe lesser intellect, the
lesser businessman, the little-brother tagalongmay now be too busy to take
his phone calls, and would jettison him from his position as a White House
special adviser without so much as a heads-up. If Icahns raid on Washington
has proved unsuccessful, he cannot blame the scrupulousness of the Trump
Administration. The aging takeover artist may have flown a little too close
to the sun in his pursuit of a particular political objective, but his
failure was itself an illustration of the power of transactional politics in
Washington. Trump may want to govern like a businessman. But Washington is a
club like any other, with some codes and protocols that even the brashest
arrivistes cannot ignore. Trump needed the farmers of Iowa to win the
Presidency, and he would need them to win it again. To a businessman like
Icahn, it may have seemed that, in the pay-for-play politics of Washington,
everything has a price. But reëlection is priceless.
Icahn eventually succeeded in gaining control of the Trump Taj Mahal casino.
In 2014, a bankruptcy-court judge expressed concern that Icahn Enterprises
would just close the place, and insisted that company executives testify
that they had no plans to shut the casino down. Initially, Icahn promised to
invest a hundred million dollars in the ailing facility. But he ended up
embroiled in yet another bitter union fight, and refused to yield on demands
from casino employees for better pay and health benefits. Eventually, Icahn
shuttered the casino. The great dealmaker would rather burn the Trump Taj
Mahal down just so he can control the ashes, Bob McDevitt, the president of
the local union, said at the time. Its a classic
take-the-money-and-runIcahn takes hundreds of millions of dollars out of
Atlantic City and then announces he is closing up shop. The casinos demise
put three thousand people out of work. In March, 2017, Icahn found a buyer:
Hard Rock International. One day earlier this summer, former employees
queued up alongside treasure hunters and curious passersby on the boardwalk
outside the beleaguered casino. A liquidator had arranged a fire sale of the
items inside. People carted home used bed linens and scuffed armchairs and
statuary of fake gold. They looked for souvenirs bearing the Trump name, but
there werent any.
For many years, an odd structure stood down the boardwalk from the Taj
Mahala three-story rooming house. It had been bought, in 1961, by an
eccentric local woman named Vera Coking, who ran it in the manner of a
boarding house in a Hitchcock film: cheap rooms for rent, with a shared
bathroom down the hall. When the casino boom swept Atlantic City, in the
eighties, many suitors came to Coking, hoping to buy her building for the
valuable land that it sat on. But Coking, who was stubborn, refused to sell.
Donald Trump was one of those suitors. Hed come over to the house,
probably thinking, If I butter her up now, Ill get her house for a good
price, she told the Daily News, in 1998. Once, he gave me Neil Diamond
tickets. I didnt even know who Neil Diamond was. Trump, the great
negotiator, could not get Coking to sell. He enlisted the State of New
Jersey to invoke eminent domain in order to oust her from her property, but
Coking fought in court and prevailed. She derided the future President as a
maggot, a cockroach, and a crumb.
Finally, in 2014, the house went up for auction. Trump had, by that time,
walked away from Atlantic City, and was preparing to run for President.
Coking was living in a retirement home in California. The property sold to
an unnamed buyer, for five hundred and thirty thousand dollars. The buyer
was Carl Icahn. He knocked the house down.
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