‘Purest Definition of a Conflict’: Icahn’s $126 Million Gain on Biofuel Deal Draws Criticism

Updated on
  • Investor Carl Icahn is also unpaid adviser to White House
  • Value of Icahn CVR Energy stake grew after biofuel deal

Donald Trump greets Carl Icahn as he arrives at an election-night event in New York on April 19, 2016.

Photographer: Victor J. Blue/Bloomberg

Carl Icahn’s stake in a Texas refiner grew by as much as $126 million Tuesday after the billionaire investor and special adviser to President Donald Trump helped broker a proposal to alter U.S. biofuels policy.

Icahn Enterprises LP holds an 82 percent stake in refiner CVR Energy Inc., which gained as much as 7.7 percent on news of a proposed deal to change the way the renewable-fuels program operates.

"This is the purest definition of a conflict of interest that you can get," said Tyson Slocum, a director at Washington-based watchdog Public Citizen. "It is clear that Icahn has played a role in influencing aspects of administration policy that have a direct financial impact on Icahn’s business at CVR."

A spokeswoman for Icahn, Susan Gordon, didn’t respond to telephone and email requests for comment. CVR Energy Chief Executive Jack Lipinski declined to comment.

While federal ethics rules prohibit government employees from profiting from their government service, those rules may not apply to Icahn, who isn’t paid for his service to the White House. Trump’s transition team said in December that Icahn would advise the president in his "individual capacity" and wouldn’t be a federal employee or a special government employee. 

"He is simply a private citizen whose opinion the president respects and whom the president speaks with from time to time," said Stefan Passantino, deputy counsel to the president for compliance and ethics. "Mr. Icahn does not have a position with the administration nor a policymaking role."

Read more: Trump Said to Weigh Biofuel Plan From Icahn, Ethanol Group

Icahn, the Renewable Fuels Association, Valero Energy Corp., and other entities hammered out a proposal on how they would overhaul the administration of the biofuel mandate and recently presented a memo to the White House outlining their compromise. That document included draft language for a presidential directive from Trump compelling the Environmental Protection Agency to make the administrative changes.

It was unclear whether the accord would gain traction in the Trump administration. White House spokeswoman Kelly Love said there was no executive order in the works dealing with ethanol.

Asked about criticism of Icahn’s role in renewable fuel policy, Deputy Press Secretary Lindsay Walters said, “I can’t speak to the particular issue in that article, but the only criteria the president uses to make policy decisions is what is in the best interests of the American people.”

Under the accord, the administration, if it agrees, would begin changing who must comply with the Renewable Fuel Standard. Under the current structure, the onus falls on refiners and importers. Refiners that have relatively little or no blending infrastructure -- like Icahn’s CVR Energy and Valero Energy -- must instead buy compliance credits known as "renewable identification numbers" to make up the shortfall. They have been pressing the EPA to move the point of obligation from refiners to blenders.

Identification Numbers

CVR said in a regulatory filing it spent more than $200 million on renewable identification numbers last year. The price of those credits plunged on the news and have been falling since Trump’s election. At one point Tuesday morning, Icahn’s stake in CVR and one of its subsidiaries increased by about $126 million, according to a Bloomberg analysis of market data. Some of the gains were erased by the time CVR closed up 77 cents, or 3.5 percent, at $22.92 in New York. It was the highest close since Feb. 21.

The Renewable Fuels Association, like other biofuel groups, had opposed the change as recently as last week in formal comments filed with the government. But the RFA’s president, Bob Dinneen, said the group agreed to the negotiations after being told the White House would make the adjustment with it or without it.

"I was told in no uncertain terms that the point of obligation was going to be moved, and I said I wanted to see one of our top agenda items moved,” he said.

Read more: Refiners Pare Gains as Trump Denies Change to Biofuels Rules

Jeff Broin, the chief executive officer of POET LLC, the largest U.S. ethanol producer, said the "back-room deal" didn’t reflect major voices in the ethanol industry.

"Carl Icahn has long been a self-interested, vocal critic of the program," Broin said in an emailed statement.

Icahn wrote the EPA last year to complain that the current set-up of the program had resulted in a rigged marketplace and would cause "a number of refinery bankruptcies."

Critics questioned whether Icahn was acting in his own capacity or as a presidential adviser.

“It’s all disturbing,” said Todd Becker, chief executive officer of Green Plains Inc., the third-largest U.S. ethanol producer.

Federal ethics rules govern employees and outside consultants and experts, called special government employees. It’s not clear that an informal adviser like Icahn would be covered by them, even in a case when the advice given produced a personal benefit, according to John Wonderlich, executive director of the Sunlight Foundation, a government transparency advocate.

"It’s certainly unethical, but as to whether it breaks any laws isn’t clear," Wonderlich said.

— With assistance by Mario Parker

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