BY Matt Atkins
Renowned activist investor Carl Icahn has come under investigation for insider trading along with two others. According to reports, the investigation began three years ago and is the latest to emerge from an ongoing crackdown on insider trading by US authorities.
The investigation reportedly centres on suspicious trades in consumer products company Clorox Co by golfer Phil Mickelson and high-profile sports better William Walters. The trades came shortly before Mr Icahn made a bid to take over the company in 2011. Mr Icahn had accumulated a 9.1 percent stake in Clorox in February 2011. In July, he made an offer which valued the company at above $10bn and did wonders for its stock price.
Federal prosecutors in Manhattan are handling the inquiry in conjunction with the FBI and the SEC. The investigation appears to be looking at whether Icahn leaked details of his failed takeover bid to Mr Walters – who Mr Icahn knows – which were subsequently passed on to Mr Mickelson.
Investigators are also looking into trades made by Mr Mickelson and Mr Walters in relation to Dean Foods Co, just before the company announced quarterly results in 2012. These trades appear unconnected to Mr Icahn.
Even supposing Mr Icahn had leaked information about his plans regarding Clorox, there is confusion to whether he would have violated the law. Insider trading regulations prohibit trading based on material, non-public information obtained from someone who breached a fiduciary or confidentiality duty by disclosing it. Since he was not a board member at Clorox, Mr Icahn owed no duty to its shareholders. It is possible that Mr Icahn owed a confidentiality duty to his own investors, though this legal argument may be a stretch, given he owned more that 90 percent of Icahn Enterprises at the time.
Mr Icahn denies all allegations against him. He told Reuters that he was unaware of any investigation and said that his firm always followed the law. He acknowledged a business relationship with Walters but said that he did not know Mickelson personally. "I am very proud of my 50-year unblemished record and have never given out insider information," he said.