TIME Regulation

Carl Icahn Denies Insider Trading

The investor says he has "never given out inside information”

Is Carl Icahn, one of the world’s best known and most successful investors, guilty of insider trading? When I reached him at his vacation home in the Hamptons on Saturday to discuss the topic following reports that the SEC, FBI, and Manhattan prosecutors are investigating whether he may have leaked illegal stock information to golfer Phil Mickelson and Vegas gambler William T. Walters, his answer was an unequivocal “No.”

“I am very proud of my 50 year unblemished record,” Icahn said, “and I have never given out inside information.” Icahn said he’s never met Mickelson or even spoken to him. But he does know Walters—indeed, the two are friendly, and socialize a couple of times a year (Icahn makes trips to Vegas and has business interests there).

That relationship seems to be the crux of the case that prosecutors would like to build around Icahn, which begins three years ago back in 2011, when the billionaire activist investor got interested in the consumer goods company Clorox. By February of that year, Icahn had built up a 9.1 percent stake in the company, and in July of the same year, he announced an unsolicited takeover bid. According to news reports about the investigation, just a few days before that bid, both Walters and Mickelson made big money trading Clorox. The question is, did Icahn tip Walters, who then tipped Mickelson, whom he ran into occasionally on the golf circuit (Walters owns a course)?

Icahn and Walters certainly chatted about stocks—Icahn talks about stocks with everyone. But I think it’s probably unlikely that Icahn, who’s one of the savviest investors around, would have knowingly given Walters insider information that would have compromised his multi-decade career and put him in the line of fire of regulators eager to bring down a big Wall Street fish. I think what’s much more likely is that Walters was a close listener, and observer, of Icahn. Walters, like many people close to Icahn (and even more who don’t know him personally at all), followed what he was doing in the markets. When they met, in Vegas or elsewhere, they’d sometimes talk about stocks. But that in itself isn’t illegal—in fact, under insider trading laws, it’s not even illegal to tell someone that you are planning to trade a stock, unless it breaches a duty of confidentiality to your own investors (which doesn’t appear to have been the case here, but that’s a legal matter that still has to be teased out).

In the end, Icahn never completed the tender offer for Clorox. But anyone who follows his career knows that he often buys up a lot of a stock before ultimately trying to gain a board seat or even buy the company. It’s not exactly a stealth strategy. And all of those moves typically drive up the price of the stock in question. That’s exactly why people follow his moves and try to buy what he does. It’s possible that Walters was a good observer of that behavior, and it’s also possible that Icahn may have talked up his interest in Clorox to him in the run up to his buyout offer. But I’m disinclined to think that this is a guy who’d risk an iconic career by giving illegal insider tips to anyone. It will be interesting to see how this investigation shapes up. Icahn claims he has yet to be contacted by any of the authorities. “We are always very careful to observe all legal requirements in all of our activities,” he told me.

You can bet that prosecutors will be looking closely in the coming weeks and months to make sure that every i has been dotted.

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