Democratic lawmakers asked regulators Tuesday to investigate a billionaire investor and President Donald Trump adviser for allegedly violating financial regulations governing the biofuels lending market.
Democratic Sens. Elizabeth Warren of Massachusetts, Sheldon Whitehouse of Rhode Island, and Sherrod Brown of Ohio, among others, wrote a letter to the Security Exchange Commission (SEC) asking the agency to probe Carl Icahn’s recent activities in the biofuels market.
They believe Icahn, who owns a majority stake in holding company Icahn Enterprises, may have used his advisory position to manipulate laws that helped his company rake in huge profits. He proposed a change to the country’s biofuels program in February that would ease the regulatory burden on oil refining companies.
“We are writing to request that your agencies investigate whether Carl Icahn violated insider trading laws, anti-market manipulation laws, or any other relevant laws based on his recent actions in the market for renewable fuel credits,” the senators said in a letter to the heads of the SEC, and the Environmental Protection Agency (EPA).
Warren and Whitehouse are not the only ones crying foul.
Public Citizen, a liberal non-profit consumer advocacy group, claimed earlier this year that Icahn was acting as a lobbyist when he advised the White House to reform a Bush-era biofuels program. He wants to change the Renewable Fuel Standard by shifting the burden of blending biofuel into gasoline away from oil refiners to gas companies.
The group claims Icahn refused to register as a lobbyist despite owning a majority stake in a refinery that could benefit from the proposed change. It made its request for a probe in a letter sent to Congress. Icahn dismissed Public Citizen’s claims shortly after the group went public with its concerns.
Trump’s opponents are using “fake news” tactics to dismiss efforts to reform the EPA’s Renewable Fuel Standard (RFS), Icahn wrote in March, referring to the watchdog group’s claim.
One of Icahn’s refineries – CVR Energy – accumulated a large short position in biofuel credits called Renewable Identification Numbers or RINs, which refiners are required to purchase. CVR Energy would have been in the cat bird’s seat if the price of RIN tumbled.
RIN prices dropped after Icahn proposed the change in biofuels regulation. CVR Energy posted a net gain of $6.4 million shortly after the proposal in the first quarter of this year, a $50 million turnaround from the year-ago period.
The Democrats’ pointed out what they believe is a close link between Icahn’s proposal and his refining company’s fortunes.
“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,” the senators wrote.
One former EPA investigator suggested in 2016 that the RIN market was susceptible to massive amounts of fraud
Doug Parker, who initiated investigations into biofuel credit fraud while at EPA, argued the RFS is “susceptible to large scale fraud” based on analyses conducted while he worked for the government.
He said the fraud risk increased as the RIN market grew 15-fold during the last six years from $1 billion to $15 billion as federal law requires refiners to blend more ethanol into the fuel supply.
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