Recently departed White House Adviser Carl Icahn is worth more than the Trump family and all members of the Cabinet combined, according to a bombshell story published Friday in the The New Yorker that detailed the downfall of Icahn from the President’s policymaking orbit.
Wealth itself does not and should not preclude successful businesspeople from entering public service.
But since public service is a public trust, the effectiveness of government employees depends on the perception that public policy is being formulated in the public interest. When senators demanded an investigation into Icahn’s company biofuels trades in May, concerns were raised about Icahn’s ability to serve as an unbiased arbiter of public policy.
The senators wanted to know what motivated Icahn’s “massive bet” that the price of renewable fuel credits would drop in 2016. The bet – resulting in a $50 million turnaround so large and so fast that financial analysts termed it ‘impossible’ – appears to have paid off. One banking analyst was so shocked that he said in an interview with Reuters, “no one has ever done anything like this.” That set off alarm bells about how and why Icahn was seeking to influence official U.S. government policy on the overhaul of its renewable fuels policy.
There were plenty of warning signs.
The New Yorker reported that the months after the election were a very lucrative time for Icahn, whose longstanding friendship with Trump was paying off. In December, Forbes reported that Icahn gained an estimated $510 million on the stock market when Trump named Icahn Special Advisor on Regulatory Reform, making him the single largest financial beneficiary from the Trump presidency in the world.
Icahn’s oil refinery company, CVR Energy, nearly doubled in value during this time. In fact, the dream scenario played out even faster than the savvy investor likely imagined. Icahn controls 82 percent of CVR and shares of the company rose 11.5 percent the week the President named him to his White House role.
In March, a front-page New York Times story revealed that Icahn had approached Environmental Protection Agency (EPA) Administrator Scott Pruitt, Chief Economic Advisor Gary Cohn and President Trump himself about his distaste for the biofuels regulation – which was set to be reviewed by the government. Icahn vocally opposed limits to their ability to blend ethanol into gasoline. These limits were seen as a competitive disadvantage for CVR Energy.
Rolling back the regulation was increasingly becoming a pet-project for Icahn, according to the New York Times. Drawing from media interviews Icahn used to publicize his position during the presidential transition, it was clear this issue was so important to Icahn that Pruitt’s supportive position triggered Icahn’s full-throated support of Pruitt for the top job at EPA.
Their past association, as they ran together in casino-magnate circles, suggest Trump was primed to heed Icahn’s advice over the advice of agency regulators. Their relationship dated back decades to joint ventures. Their mutually beneficial relationship dates back to joint ventures in Atlantic City, New Jersey in the early 1990s; and Icahn hit the legal maximum contribution to Trump’s presidential campaign in June 2016. As recently as 2014, Icahn bought Trump’s Taj Mahal Casino, temporarily saving it from bankruptcy.
Icahn’s position as presidential advisor poised him to reap new rewards as he pursued his deregulatory crusade. Given his extensive financial interests in the area, his new position at least appeared to come with the potential for significant financial benefit as a result of his work with the new administration. In his resignation letter to President Trump, Icahn would later claim he had no policymaking role and that he never profited from his position. The facts on the first point are murky but the numbers prove that business has been good for CVR Energy of late.
Whatever the facts may be, Icahn may have had good reason to deny having carried out a federal function. The Administration’s legal position has been that Icahn was never a federal employee and, thus, was never subject to government ethics rules. A finding to the contrary could subject Icahn to scrutiny for activities that, according The New Yorker, seem to relate to his financial interests. The government’s conflict of interest laws are strict, and they come with consequences.
Did Icahn violated these laws?
The answer depends in part on whether, contrary to the White House’s assertions, he was a federal employee. Guidance issued by the Department of Justice’s Office of Legal Counsel indicate that an individual can qualify as a federal employee—and, therefore, be subject to the conflict of interest laws—without the ordinary formal confirmation of an appointment.
There remain facts to develop and legal analyses to perform. So three big questions remain:
- Why isn’t the Department of Justice looking into the Icahn matter?
- Will the White House, fresh off this win, skirt the ethics laws by expanding its use of informal Presidential advisors?
- If Icahn wasn’t a federal employee, why did he feel the need to submit a formal resignation from a position he says he didn’t hold?