Billionaire Carl Icahn Pays $2 Million to Settle SEC Investigation
The U.S. Securities and Exchange Commission announced charges against billionaire Carl C. Icahn and his publicly traded company, Icahn Enterprises LP (Nasdaq: IEP), for failing to disclose personal loans worth billions of dollars that were secured using securities of IEP as collateral. IEP and Icahn agreed to pay $1.5 million and $500,000 in civil penalties, respectively, to settle the SEC’s charges.
According to the SEC’s orders, from at least Dec. 31, 2018, through the present, 88-year-old Icahn, who is IEP’s controlling shareholder and chairman of the board of directors of IEP’s general partner, pledged 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. Notwithstanding Icahn’s various margin loan agreements and amendments, IEP failed to disclose Icahn’s pledges of IEP securities as required in its Form 10K until Feb. 25, 2022. Icahn also failed to file amendments to Schedule 13D describing his personal margin loan agreements and amendments, which dated back to at least 2005, and failed to attach required guaranty agreements. Icahn’s failure to file the required amendments to Schedule 13D persisted until at least July 9, 2023.
“The federal securities laws imposed independent disclosure obligations on both Icahn and IEP. These disclosures would have revealed that Icahn pledged over half of IEP’s outstanding shares at any given time,” said Osman Nawaz, chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “Due to both disclosure failures, existing and prospective investors were deprived of required information.”
A resident of Sunny Isles Beach, Fla., Icahn acquired control of IEP’s predecessor in 1990. Prior to, Icahn bought Trans World Airlines in 1985; it filed for bankruptcy in 1992. It continued to operate at a loss until its assets were sold to American Airlines in 2001. More recently, Icahn took a an approximately 10% stake in Jet Blue.
Since 1990, Icahn and his wholly-owned entities have been the controlling shareholders of IEP, and Icahn has served as chairman of the board of IEP’s general partner, and a named executive officer of IEP. Between December 2018 and December 2023, Icahn and his wholly owned entities owned between approximately 85% to 92% of IEP’s outstanding depositary units.
As of Dec. 31, 2023, IEP had approximately $20.9 billion of assets and approximately 429 million depositary units outstanding. Earlier that year, IEP’s business practices were under scrutiny. A short-seller report from Hindenburg Research described in third-party reporting by the Associated Press and The Wall Street Journal, claimed “Ponzi-like economic structures” at the holding company and the use of inflated asset valuations. Since the report, shares of the company are down 68%. Icahn posted a loss of $331 million in the second quarter of 2024.
The SEC’s latest orders find that IEP violated Section 13(a) of the Securities Exchange Act of 1934 and Rule 13a-1 thereunder and that Icahn violated certain beneficial ownership reporting provisions of the Exchange Act. Without admitting or denying the findings, IEP and Icahn agreed to cease and desist from future violations and to pay the civil penalties.
Click here to visit AltsWire directory page.
