When the chair of a company’s board—and its controlling shareholder—is alleged to have tied most of its assets to secure personal loans, that’s the sort of thing he might want to tell investors about. And by might, we mean it’s required by federal law.
Carl Icahn and his company, Icahn Enterprises (IEP), settled charges that for years they failed to disclose that the famed and feared investor had put up more than half of the company’s shares as collateral for “personal margin loans worth billions of dollars,” the Securities and Exchange Commission (SEC) announced Monday.
“Icahn pledged over half of IEP’s outstanding shares at any given time,” Osman Nawaz, chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, said in a press release announcing the settlement. “Without admitting or denying the findings, IEP and Icahn agreed to cease and desist from future violations and to pay the civil penalties,” according to the release.
To settle the SEC’s charges that they violated reporting requirements under the Securities Exchange Act, IEP and Icahn agreed to pay a combined $2 million in fines and pledged not to violate them in the future.
Icahn put up between 51% and 82% of IEP shares as margin loan collateral starting around Dec. 31, 2018, but IEP only began reporting that on its 10-Ks in 2022, the commission said in the press release. Icahn hadn’t filed amendments to his Schedule 13D about personal margin loans over a period that stretched from 2005 (or earlier) through at least early July 2023, the release said.
Down in flames. The SEC settlement is the latest chapter in what some see as the descent of IEP since May 2023, when short-seller firm Hindenburg Research published a report that Icahn’s “company was overvalued, inflated asset marks and paid an unsustainable dividend,” the Wall Street Journal reported this week. IEP’s share price has fallen 68% since the report, the Journal said, and “it slashed its dividend by half and was forced to renegotiate terms of his loans.”
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