Carl Icahn, the billionaire investment tycoon, and his firm Icahn Enterprises LP (IEP) have been charged by US regulators with failing to disclose billions of dollars worth of personal loans.
The Securities and Exchange Commission (SEC) said IEP and Icahn, who serves as chairman, agreed to pay $1.5m and $500,000 in civil penalties, respectively, to settle the charges.
Since 31 December 2018, Icahn used securities of IEP – pledging approximately 51% to 82% of IEP’s outstanding securities – as collateral to secure personal margin loans worth billions of dollars under agreements with various lenders, the SEC said.
IEP did not disclose Icahn’s pledges of IEP securities in its annual report until February 2022, according to the agency, and Icahn failed to file required amendments to filings until July 2023.
Without admitting or denying the SEC’s findings, Icahn and IEP agreed to cease and desist from future violations, and to pay the civil penalties.
The agreement comes 15 months after the prominent short-seller Hindenburg Research published a string of allegations about IEP, including claims that it overvalued its holdings and relied on a “Ponzi-like” structure to pay dividends.
In a statement on Monday, Icahn hit back at Hindenburg for publishing what he described as a “false report” so it could make money on a drop in IEP’s stock. An ensuing government investigation “resulted in this settlement”, he said, “which makes no claim IEP or I inflated [net asset value] or engaged in a ‘Ponzi-like’ structure”.
Shares in IEP fell 5.5% on Monday morning in New York, as the SEC said investors in the firm had been “deprived” of information about Icahn’s loans.
Icahn, 88, has a personal fortune of more than $6bn, according to Bloomberg. He is one of the world’s most prominent activist investors, buying up shares in companies and demanding changes.
“The federal securities laws imposed independent disclosure obligations on both Icahn and IEP,” said Osman Nawaz, Chief of the SEC enforcement division’s complex financial instruments unit. “These disclosures would have revealed that Icahn pledged over half of IEP’s outstanding shares at any given time. Due to both disclosure failures, existing and prospective investors were deprived of required information.”
Icahn said: “Hindenburg’s modus operandi, which is to publish scurrilous and unsupported allegations, did damage to IEP and its investors. We are glad to put this matter behind us and will continue to focus on operating the business for the benefit of unit holders.”
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On Monday, Hindenburg stood by its report and said that Icahn “rightly got charged by the SEC for failing to disclose details of his massive margin loan”.
Jonathan Streeter, an attorney advising Icahn Enterprises, said: “More than a year ago Hindenburg published a self-serving report that made false and totally irresponsible allegations IEP inflated its net asset value and had ‘Ponzi-like’ dividends. The government investigated these claims and IEP and Carl Icahn fully cooperated. The result is this settlement.
“In short, the government found absolutely no fraud and did not find any inflation of IEP’s NAV [net asset value] or impropriety in its dividends. Instead IEP is settling an unrelated disclosure violation on issues that were reviewed by outside advisors at the time in question.”
IEP corrected the disclosure violation in February 2022, “more than a year before the Hindenburg report and the start of the government investigation”, Streeter said. “When IEP made that correction, its unit price barely moved and the market did not react.”
