Icahn Regulatory Role Risks Conflict: Watchdogs, Democrats

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By Brian Dabbs

Carl Icahn has largely flown below the ethics radar since President Donald Trump tapped him as an informal regulatory adviser in late December.

A swirl of controversy, ranging from Trump’s commitment to retain his business holdings to Michael Flynn’s abrupt resignation as national security adviser, continues to dog the administration and grab headlines.

But Senate Democrats are now directing their firepower at Icahn, the billionaire Trump ally whose petroleum refinery and other business interests will be directly affected by a regulatory overhaul. And watchdog officials are crying foul.

The still-opaque ties between Icahn and Trump marks a departure from past special-adviser relationships at the White House and could lead to a reshaped regulatory framework that directly benefits Icahn, those watchdog officials told Bloomberg BNA.

‘Apex of Power’

“This is unprecedented in its lack of clarity and transparency,” said Meredith McGehee, policy chief at Issue One, an organization that aims to ax large and secretive political financing. “The fact that this is occurring at the White House is unique and worthy of more information. Because at the White House, you’re at the apex of power,”

Those watchdog officials point to the possibility of a clear-cut conflict of interest.

As of a few months ago, Icahn owned 82 percent of CVR Energy Inc., a Sugar Land, Texas-based company involved in petroleum refining. That company and at least some of its subsidiaries have to comply with the renewable fuel standard (RFS). Icahn has publicly called for a change of the biofuel mandate’s compliance arrangements, urging that it move from refiners and importers to downstream entities such as retailers.

Two of those subsidiaries initiated litigation Feb. 9 against the RFS 2017 quotas ( Coffeyville Resources Ref. & Mktg v. EPA, D.C. Cir., 17-1044, 2/9/17 ).

Unique Advisory Role

In announcing the relationship in December, the Trump transition team said Icahn will not serve as a federal employee or a special government employee. Instead, Icahn will advise the president “in his individual capacity” and “will not have any specific duties,” the transition team said.

Icahn rejected allegations of a conflict of interest immediately following that announcement, arguing he will simply continue to contribute informal advice. “I’m not making any policy,” he told CNBC.

Special government employees are statutorily prohibited from participating in government matters that substantively affect personal business interests barring certain waivers.

Such employees are common in agencies throughout the federal government, the watchdog officials said.

And those employees occasionally run into ethical dilemmas. McGehee pointed to conflict-of-interest allegations surrounding Huma Abedin, a special government employee for the final stretch of Hillary Clinton’s State Department under President Obama. Abedin also took paying jobs with the Clinton Foundation and Teneo Holdings LLC, and critics alleged her State Department access may have factored into advice provided to Teneo, a consultancy with clients abroad.

Still, Daniel Schuman, policy director at the government reform group Demand Progress, said the potential Icahn conflict uniquely involves his ambiguous advisory status and the potential for massive profit from policy changes.

“It’s not out of the norm to receive advice from outside parties, and in some respects that is only appropriate,” Schuman told Bloomberg BNA. “But this situation is unusual. This is particularly fraught.”

‘An Unacceptable Risk’ of Conflict

A group of seven Senate Democrats are pushing the administration to divulge more details about Icahn’s role.

Icahn’s past comments on the biofuel compliance process “suggest he will be actively working to change the RFS regulations to benefit CVR,” those Democrats, led by Sen. Sheldon Whitehouse (D-R.I.), told a White House attorney Feb. 13. “Mr. Icahn’s role presents an unacceptable risk of further real or potential conflicts of interest.”

The RFS program, which was made law in 2005 and expanded in 2007, sets annually increasing biofuel quotas. The goal of the program was to decrease hydrocarbon emissions and reduce dependence on foreign oil. Nearly all transportation gasoline in the U.S. now contains 10 percent ethanol.

Refiners and importers either have to blend renewable fuel into their product or purchase credits to comply with the EPA mandate. Icahn’s refineries have steered clear of blending, and a manipulated credit market costs CVR millions annually, Icahn has said.

Other refiners, such as Valero Energy Corp., also argue the current compliance structure creates a credit market rife with speculation.

A spokeswoman for CVR Energy Inc. didn’t respond for comment, nor did the lead lawyer for the subsidiaries. A White House spokeswoman also didn’t respond to a Bloomberg BNA request for comment.

Recusal?

The Democrats urged the White House to provide details on Icahn’s financial disclosures, divestment, access to confidential information, possible prohibitions on advice on or recusal from particular regulations.

Icahn’s lack of recusal to date from advice on any regulatory overhaul efforts linked directly to his business interests is particularly concerning to watchdog officials.

“Actions that this government takes including those involving Carl Icahn should be scrutinized closely, and they shouldn’t get the benefit of the doubt that there is no conflict of interest,” Amit Narang, a regulatory specialist at Public Citizen, told Bloomberg BNA. “It could be a real conflict if Mr. Icahn is trying to insulate himself by not officially being a member of the administration. That’s a loophole that needs to be addressed and closed.”

Icahn’s main company, Icahn Enterprises L.P., describes itself as “a diversified holding company engaged” in 10 total business areas, including mining, food packaging, rail and automotive.

The Democrats requested a response by Feb. 15.

To contact the reporter on this story: Brian Dabbs in Washington at bdabbs@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

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