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Senators demand investigation into Icahn company biofuels trades

A group of US senators has urged a government investigation into billionaire Carl Icahn’s involvement in an obscure market for US biofuel credits, arguing he profited by influencing prices through his role as informal counsel to President Donald Trump.

Mr Icahn controls CVR Energy, an oil refiner which trades credits used to meet a federal mandate for mixing ethanol and biodiesel with petroleum products.

In December, the investor was named special adviser on regulatory reform to the White House. He also helped vet Mr Trump’s nominee to head the US Environmental Protection Agency, which sets policies for the biofuel mandate.

The cost of biofuel credits, long bemoaned by CVR management, declined sharply after Mr Icahn was named White House adviser, on the assumption that the new administration might loosen the terms of the mandate. News organisations later reported that CVR had positioned itself up to cash in from a fall in the market for credits, known as Rins.

Eight Democratic senators including Elizabeth Warren of Massachusetts and Debbie Stabenow of Michigan sent a letter on Tuesday asking three federal agencies to investigate whether Mr Icahn violated laws on insider trading and market manipulation based on CVR’s trading in the credits.

“Mr Icahn ‘made a massive bet in 2016’ that the price of the renewable fuel credits would drop. He then — as an unpaid adviser to President Trump — recommended personnel and policies that did in fact cause the price of these credits to drop,” the senators wrote, citing Reuters articles.

Jesse Lynn, general counsel at Icahn Enterprises, did not immediately respond to an email seeking comment. Of the three federal agencies addressed by the letter, the Securities and Exchange Commission and the Commodity Futures Trading Commission declined to comment and the EPA did not immediately respond to a query.

A filing from CVR’s refining partnership disclosed a net gain of $6.4m from Rins in the quarter ended March 31. This compared with an expense of $43.1m in the same quarter of 2016, a positive swing of nearly $50m. The partnership estimated Rins would cost $170m for the full 2017 year.

“The price of Rins has been extremely volatile over the past year. The future cost of Rins is difficult to estimate,” the filing said. CVR declined to comment in response to a query from the Financial Times.

Mr Icahn has argued vociferously that wholesalers and petrol stations should bear the burden of buying Rins, not refiners. He refuted suggestions of a conflict of interest in an interview with the Financial Times in January. “It’s true that I would benefit as a refinery owner, but so would every refinery as well as the small gas station owners and . . . the public,” he said.

The senators wrote: “We have no way of knowing at this time whether Mr Icahn made any of his renewable fuel credit trades or decisions about trades based on material, non-public information or otherwise manipulated the market. But the publicly available evidence is troubling, and based on this evidence, we ask that your agencies investigate whether Mr Icahn’s conduct violated any laws under your jurisdiction.”

Shares of CVR briefly dropped 2.5 per cent after the letter became public, but rebounded to trade 0.4 per cent lower at $22.20 at the close in New York on Tuesday.

Via FT