Grubstakers - Episode 29: Carl Icahn feat. Jay Welch

Episode Date: August 20, 2018

Carl Icahn is our Billionaire of the week. We discuss his self-serving dismantling of TWA airlines, his reputation as a corporate raider, and his brief period as special economic adviser on financial regulation for President Donald Trump. Joining us on this week on our icIahnic journey is hilarious New York comedian Jay Welch. All of this and more right here on Grubstakers!

Welcome to Grubstakers, the podcast about billionaires. This week we're taking a look at Carl Icahn, the famous corporate raider and one of the inspirations for the Oliver Stone movie Wall Street. Hear all about how he pioneered techniques of asset stripping and how he destroyed TWA, as well as the case he is involved in today where he might have allegedly done insider trading in the Trump White House. All that and more coming up on Grubstaker. targeted for your race. I am proud to be gay. I am proud to be a Republican. You know, I went to a tough school in Queens, and they used to beat up the little Jewish boys. You know, I love having the support of real billionaires.

Five, four, three, two... Hello, it's Grubstakers for the week. I'm Sean P. McCarthy here, joined as always by... Andy Palmer. Yogi Poliwag. Steve Jeffries. And today on the podcast about billionaires, we are taking a look at Carl Icahn, and we are actually joined today by a very funny comedian, Mr. Jay Welsh.

Hi, Sean. Thanks for having me. And Jay, in addition to being a great comedian, has actually read the biography, King Icahn, about Carl Icon. So he is here today auditioning for Andy's spot on the podcast. But Carl Icon, we've mentioned him a little bit on previous episodes, particularly the Bill Ackman one. But just to give you a brief summary, Forbes puts his net worth at about $19.6 billion as of August 2018. And he has been called a pioneer of what's called corporate rating. Corporate rating is briefly the process of buying a stake in a company and then using shareholder rights to essentially do different

measures to increase the value of the company, such as layoffs or restructuring or liquidation, and then exiting your position. And also on the episode... Also known as think fluency. And he's also been kind of a precursor to private equity, which we mentioned a bit on the episode about Josh Kossman, or with josh costman um but i guess as far as uh icon goes uh we should probably start um from his stand-up set at carolina i'm telling you these stories are funnier than the jokes you can tell

i do like so yes he did perform at Caroline's which is like you're in a room full of four comedians who have not performed at Caroline's and the guy who was all four of you guys are comedians it turns out like instead of hitting they have independently produced shows Sean

sometimes people perform on independently produced shows at Caroline's instead of doing instead of uh doing the open mics we should have just been bankrupting twa to get our start um but so like where is his career now right show me show me how many writing how many staffs he's been on i mean he was gonna get a netflix show but it got canceled. And I mean, it was going to be really good, though. Honestly, I thought his work for the break with Michelle Wolf was excellent. And it's a tragedy that he got fired as consulting producer.

I mean, he pulled Big Bang Theory out of a slump by diversifying the cast. That was his idea. He's being investigated because he sold all his netflix stock right before the break got canceled he knew it was coming um but so yes with with carl icon i think what's what's most fascinating to me about the man is um just this uh brief quote from a new yorker uh piece that was written on him and we'll start there so carl icon uh a few years ago sold his mega yacht uh according to new yorker because he said cruising on it bored him and uh a reporter asked him years ago why he kept making money when he already had more than he could ever spend again nine point 19.6 billion dollar net

worth and carl icon said quote it's a way of keeping score end quote and that's like i'll give you another one that really happened and that's like all you really need to know about uh icon is like nothing in the world makes him happier by his own admission than just being up late at night doing these deals and these financial machinations and stuff and it's it's really not as much about the money as it is just like the actual thrill, the art of the deal, you might say. Sure, sure. I guess we should probably mention that Donald Trump has been a big beneficiary of ICON or maybe an idol. You know, people talk about how Donald Trump looks up to these billionaires who are what Donald Trump wants to be, let's say that.

And Icahn is a relatively self-made billionaire, except for a loan from his uncle. You can say he's an Icahn. He is very heavily a self-made billionaire. Like, the percentage of it that's self-made is pretty high. It was a big transfer from the TWA flight attendants to Carl Icahn. No, no. But in terms of money that friends and family gave him. Genuinely, he is one of the more self-built billionaires out of the bunch.

Self-exploiting, yeah. Well, one sign of that is that it took him 20 years to become one. Right. It took him 20 years to become someone who had $10 million. Right, right, right. become one right or not not even it took him 20 years to become someone who had 10 million dollars and look with the with a guy like carl icon of course we can say he grew up in at least lower middle class circumstances and he built a fortune with that but i think it kind of begs larger societal questions which is like does the way he made his money actually benefit society and uh for their part uh hedge clippers which is which is, again, an anti-hedge fund type organization,

so maybe they're a little biased, but they looked at 10 deals Carl Icahn was involved in from the 80s up to 2016. And they calculated that Icahn's investments resulted in layoffs of more than 35,000 jobs in major U.S. industries, as well as the elimination of pensions and health benefits for more than 126,000 American families. And again, we... I'm telling you, these stories are funnier than... Ed, look, we've kind of gone through this ad nauseum with regards to private equity, but in the corporate raider playbook, which again, you can see Icon was a major inspiration

for the Oliver Stone stone movie wall street where it is like you come in and you you buy something and then you make these cuts which are usually layoffs or pension cuts and then once you've squeezed uh expenses now there's more cash flow and you can sell it for a profit or in the case of icon he engaged in asset stripping particularly with twa where you uh sell sell off individual divisions with an airline. In the case of TWA, you sell some of their flight routes to their competitors and like these kinds of things that might make you a short term profit, but are certainly in the case of TWA damaging to the long term business. There's a real question to some extent of like what a company is.

Right. Like, is a company the shareholders? Is a company the people who work for it? Is a company the business that it does as a business? And to Carl Icahn, a company is its assets that can be sold individually, and if those can be sold for more than the company, then the company does not need to be a going concern. And just to kind of describe Carl Icahn a little bit,

a quote from the book King Icahn is that Mark Stevens, the author, has described Carl Icahn as, quote, a germophobic, detached, relatively loveless man. And he quoted a contemporary of Icahn's who said that Carl's dream in life is to have the only fire truck in town. Then when your house is in flames, he can hold you up for every penny you have. And so, again, we've just kind of mentioned that the animating joy in his life

is doing business deals, but it's questionable whether or not he has any real friends or, let's say, larger human interests beyond his business. Wait, what was that line? Relatively loveless? What was his business. What was that line? Relatively loveless. What,

what, what was it? The beginning of that quote relatively low. What does that even mean? Germaphobic, detached, relatively loveless. You know,

he's married and you know, they're sort of like saying, but does he, they're not saying that there was no love in the marriage, but I think they're like getting out of like, what's, you know, he is animated by some other things than self-interest. there was no love in the marriage, but I think they're getting... Relatively loveless. He is animated by some other things than self-interest.

Just feels like another word for robotic. One more thing from the New Yorker article is once in a court proceeding, Carl Icahn said, quote, if the price is right we are going to sell. I think that's true of everything you have, except maybe your kids and possibly your

wife. And then the judge asked Icon, possibly, question mark, and Icon said, possibly, adding don't tell my wife. And then he was later divorced. That was his first wife. That was his first wife, which ended in a very vicious divorce

and he is now married. It was a brilliant moment for me. One of my happiest moments. Of course. Is this related to this? Sure, sure. So this is also from King Akon. This is written by, okay, quote, Observing Carl over the years, I have come to think of him as a bull,

snorting and pacing in front of a barbed wire fence. He is always looking for a way to get through that fence, to strike a deal. Although it looks to everyone else as if there's no way out, Carl finds a way. That's a quote from Gail Golden, ICON's executive assistant since 1978. Six years after that quote, she married him. A bull

always looking for the way out of his marriage. Well, they take baths together. They're doing alright. The divorce was lengthy because she wanted the Czechoslovakian ballet dancer, I believe. The number of ways in which Carl Icahn's first wife is similar to Ivana Trump is uncanny. It's hilarious. They both married women from Czechoslovakia in the late 1970s.

They both got divorced for a long time in the 1990s. They had the same divorce attorney. Really? Jay Goldberg. When you look at information about their son Brett Icahn on Wikipedia and stuff, it always says and his other son, Bread Icon. Like it's a very like inclusionary type of sentiment

that they have on Wikipedia. I do like that on Bread Icon's Wikipedia article. He is described as a quote philanthropist. Yeah, right, right, right. Which is like,

oh, how'd you get that job? He is not a self-made philanthropist, fair to say. Oh, but briefly, can I say, Golden was the founder of an organization

called Gutsy Women Travel. GWT. They were able to get half-off tickets thanks to Carl Icahn's deal with TWA. It's an amazing deal. Also, if you want, on eBay right now, for $10, you can get Stop Carl Icahn buttons. From TWA?

From the TWA, yeah, strikes and stuff. If you want to buy buttons that don't work. You know what you can't buy from eBay? Is a flight from St. Louis to New York for $125. So we'll get into the TWA case more in a little bit here. But just to do the Trump thing briefly, while Trump was campaigning for the presidency, he repeatedly said that he would make Carl Icahn the U.S. Treasury Secretary. Icahn, for his part, said, quote, I am flattered, but I do not get up early enough in the morning to accept this opportunity.

But of course, according to another failed trump campaign well it was it was at a point in his campaign where trump was sufficiently unpopular right that trump was like waving around a good relationship with carl icon as as like uh this is a sign of seriousness of purpose right right right you know that guy responsible for 35 000 layoffs uh well his q factor is a little better than mine i will say the chamber of commerce never found trump more relatable you know if you're trying to get credibility with business conservatives yeah um but just on the treasury secretary point and uh we'll probably circle back to this but carl icon during the transition apparently uh interviewed uh trump's uh uh steve mnuchin, the Treasury Secretary.

He interviewed Scott Pruitt, the former EPA director now. And he also interviewed Jay Sekulow. Jay Clayton. Yeah, the SEC guy. Yes, yes. The head of the SEC and the head of the Secretary of the Treasury and the head of the EPA. You can see why, and these people have wide regulatory oversight of Carl Icahn's business. Yes.

You can see why him being part of the job interview process. Right. Like the way the New Yorker article describes it is these people literally, in the case of Scott Pruitt, met Trump and then at the end of the meeting Trump said okay now you gotta go two blocks uptown to have an interview with Carl Icahn. Yeah, you thought this interview was on 57th

Street. It is on 57th Street and 59th Street. We'll be right back. Hey there, I'm Chris Hayes from MSNBC. But we can return to all that because I want to start generally chronologically with Carl Icahn, the man, and how he became what he is today, and these kinds of things. And just for a brief biography, and Jay, you've read the book, so please jump in at any point and add color to our commentary here.

But Carl Icahn was born in 1936 in Far Rockaway, Queens. And he was the only child... Oh, Richard Feynman's stopping around. He was an only child born near the end of the Great Depression. An interesting revealing quote from the New Yorker profile was that throughout his youth,

Carl Icahn's father railed against the robber barons, condemning the concentration of extreme wealth. Icahn told the biographer Mark Stevens, quote, the social juxtaposition of a tiny group of people living in great splendor and many more living in abject poverty was anathema to him, to his father. Can I add another quotation that Carl Icahn had? This is from The New Yorker.

Yes. He also said, it was Carl Icahn, quote, my father was never able to accomplish anything. I never respected him. Exactly. I'm telling you, these stories are funnier than the jokes you can tell. Yeah, but so you

see that kind of contrast where his father, again, so it's a lower middle class family in Far Rockaway, Queens. His mother was a school teacher. His father, again, so it's a lower middle class family in Far Rockaway, Queens. His mother was a school teacher. His father was, according to The New Yorker, a failed opera singer. And even though he was an atheist, he became the cantor in a local synagogue because he loved the music. He also worked part time as a school teacher.

But this is kind of a lower middle class. Never accomplished anything. Sweet. He raised a fucking billionaire. Right, right. That was enough for Mike. He taught him. He failed to give him the sense of right and wrong

that enabled him to become a billionaire. He was a part-time teacher, but unfortunately he raised Carl Icahn. If Carl Icahn's dad had been better at accomplishing things, those people at TWA would still be flight attendants. They probably wouldn't. The odds that we'd have a fourth airline is vanishingly small.

That company would have gone out of business in 2008 instead of 2001. Warren Buffett has anything to say about it. He owns all the airlines. Go ahead, listen to our Buffett episode. But so, continuing from this story in the New Yorker profile is

basically, Icahn was, you know, like a smart student, and he was offered a scholarship to Woodmere Academy, which is a private school in Long Island, but his parents decided, they worried that the values of a private school would negatively impact him.

Wait, what kind of school is that? A private school. What kind of private school? I don't know, a tough one. Oh, it was a Jewish private school? Woodmere Academy? I don't know, actually. I don't think so. You know, I went to a tough school in Queens.

They used to beat up the little Jewish boys. So that's the school that he went to. That he went to, yeah. He went to the public school. He attended Far Rockaway High School, which he has described as a tough school in Queens, where they used to beat up the little Jewish boys. He's just bitter because Richard Feynman

would beat the shit out of him every day. What you're saying, Sean, is that Andy had the drop on you. But it's like, it is interesting. I can't. It is interesting where the fact that his parents decided not to send him to this private school that he got a scholarship for clearly stuck with him. half a century later in the heat of high stakes negotiation icon would occasionally digress to inform his adversaries that although he attended public school instead of wood woodmere academy he still went on to become a billionaire although he attended princeton university instead of a different ivy league school he still went on to become very successful

which also you know he went to far rockaway and then got into princeton very impressive yeah right and um uh so yeah and this kind of continues he goes to this far rockaway this tough school in queens and uh his parents say to him that they will pay for his college assuming he gets into um an ivy league and they uh he believes that they didn't think that he could actually do that but he did get into princeton and his father um uh paid for him uh to go there but he didn't pay like room and board and interestingly enough there's a uh there's an interview that carl icon does in 2015 for Wall Street Week with Anthony Scaramucci, where Carl Icahn breaks down crying because Scaramucci was cutting up onions for the sauce

or something. But or he at least tears up a little bit telling the story of his father. And the way Carl Icahn explains it is essentially as near the late 70s when he started to become, you know, successful on Wall Street. He says that his father never asked him for what he did for a living or how he did it. But then in a visit to his parents in Florida, he says his father pulled him aside, hugged him and handed him a yellow notepad and said, quote, here, explain to me what you do and icon said icon the way he tells it he says i hugged him and said you finally admit it it still makes me cry for some reason that for some reason i think that's a pretty straightforward

reason yeah yeah yeah yeah this scene again like i don't think he's like a total sociopath there's there's people where there's no like or remorse. Yeah, he just, it's not like he's misguided or misjudging the situation, but it's like, no, your dad admits that he wants to know what you do with your life. That's emotional in itself. And also, if you're not working as an options trader, it's hard to understand exactly what that is, maybe. And that's before you get to the really complicated job. Would you be able to actually write it down for your guys' dads?

What do you do? That'd be pretty hilarious to just see that on one page. For me, anyway. Go to a podcast. He drew a picture of flight attendants and then a directional arrow with the dollar signs going from them to him. By the way, you're leaving out the pilots i like that he's kind of bitter that his parents didn't pay for room and board when he went to princeton with in a time where that was like five dollars but also like princeton at the time was a very snobby place yeah they were not particularly friendly to jews and there was a very like

hierarchical thing with what the best eating clubs were and stuff like that. It's not insane that there's a chip even within that privilege. Icon says, quote, my parents never thought I'd amount to too much. They were just really mad he didn't become a doctor.

No, seriously. He enlisted in the army after he went to med school for two years and then he dropped out of med school because he could not stand the sight of blood and he was a germaphobe and a germaphobe which are both very bad things in a doctor i would say i would say one of those is a deal breaker either of those is a deal breaker and eventually he was like i could have been a real doctor spit chairman like people people kept telling him all right you're gonna look at this guy who has TB and you're

going to look at his symptoms. And he's like, I don't want to look at a guy who has TB. I could get TB, which is an understandable feeling, but very bad at a doctor. And so he dropped out of med school after two years. And then he was like, if I'm not in med school, my mom is going to make me go back to med school. This is like, you is like when you're 22 and you think your parents still have power over you.

Right, right. And to some extent they do. So he enlisted in the Army Reserves because if he was in the Army, the Army was the only thing stronger than his mother's desire for him to go to med school. Right, right. I like how his traumatic experience with medicine

led him to prevent hundreds of thousands of Americans from having the same experience by destroying their health insurance. I'm telling you, these stories are funnier than the jokes you just told. But so the story is, because his dad wouldn't pay for room and board at Princeton, Icon got a summer, this is from Business Insider, Icon got a summer job as a cabana boy at the Malibu Beach Club, and then he says there he started playing poker with the guests, and by the end of the summer he had earned himself $2,000. And this

is in the early 60s, well past the $750 he needed for room and board. He also claims that by the time he left college, he had amassed about $10,000 playing poker. And he also was a formidable chess player as a youth who says he could have

gone on to be a grandmaster, but there was no money in it. But we mentioned... But there was high-profile anti-Semitism. That's not a Jew. That's a knight, Andy. It's offensive of you to even think like that. I'm repulsed.

Come on, Andy. We have a guest here today, all right? Keep that talk for the episodes where we don't have guests. Andy, I'm fine with you saying stuff like that on an episode that Jews don't listen to. Wait, I like the idea. You go on YouTube to watch like Bobby Fisher chess strategies and then the next suggested video is Bobby Fisher thoughts

on the global experience. Or it could be like YouTube gets you gradually more stressed and it starts with like Bobby Fisher chess strategies and eventually it's like, okay, this is how you're going to take the company private It used to be the Jews were sort of Hiding in the background But under the Putin administration

They'd come I can't get enough of Bobby Fischer anti-Semitism You know Agree to disagree He was Jewish You know? Agree to disagree. He was Jewish, and he claimed that people who said he was Jewish were spreading CIA lies. Here's how detached I am from that. I just wish that somebody had recorded him with a better microphone.

You meet him in person, and he still sounds like you. There's a delay. I think Bobby Fischer is at his best when people are searching for the idea. That's where I am. College. Yeah. Carl Icahn. Sure. He studies philosophy at Princeton.

According to the New Yorker, he writes a thesis titled, quote, The Problem of Formulating an Adequate Explication of the Empiricist Criterion of Meaning. Which, uh, I'm already confused. Yeah, what the fuck does that mean? It means, basically, that there is no such thing in meaning

as results. It's a very cold-blooded way of breaking down it's saying that when you look at a company all it is is assets it really it's very similar huh there's a real through line to it so is it like the value of something is not the result of it but what it is in the is saying there's no meaning but data basically okay is the argument and it was a very successful like it was an award-winning thesis at Princeton and that and that's kind of milton freed many like uh just kind of the

looking at nothing or the economy in terms of just like the numbers in the market sean's shaking the numbers of helicopters flying over penis shazers um but numbers of bombs i will say credit where it's due carl icon has largely stayed out of the military industrial complex well it's nice to hear a billionaire hasn't contributed to what's he left that to the carlisle group um but yeah no i just like the idea of like all the laid-off workers receiving uh their severance notice and then a copy of his thesis along with it like this this will help console you. Your job is meaningless.

No, you're confusing things because he's only interested in profit. He's not interested in cruelty as an end in itself. He would only do that if he thought that cruelty would advantage him. He happily inflicts fear and anguish into people, but only for the purposes of reducing their negotiating skills.

Once the deal is done, he's happy to have a drink with them. There is a quote. I believe it's from Fortune or Business Insider. Apologies if I misquoted it. I mean, if he's against cruelty, how do you explain this Caroline set? He's not against cruelty.

But he's not for cruelty as an end in itself. Again, how do you explain this Caroline set? You know, I got to say, Andy, there is a problem with formulating an adequate explication of the abuser's criteria of meaning. But so, oh, yeah, well, there's a story from Hedge Clippers, which was he was involved in a deal with Family Dollar, and he invited the CEO to his office or his penthouse. And when the CEO of Family Dollar got there, Carl Icahn was making him an alcoholic drink. And the CEO says, no, I better not drink. I should probably keep my wits about me for this. And Carl Icahn told him, not drinking is not going to help you here so you might as well have a drink uh you know i mean he kind of intimidates people that way carl icon is also the

same person who will start a meeting at 9 p.m and then show up to the meeting two hours late and between 9 p.m and 11 p.m he took a nap i thought were going to say he got a couple sets in. Again, he's neither a sadist nor a masochist. This is actually him talking about one of those meetings. www.blowme.com You know, we just had that in the queue. That was actually him? It was Dennis Leary. Oh, that's much better.

You know, given a choice. It did sound like Bill Hicks. All right. Well, so Carl Icahn, as we mentioned, he tried medical school. It wasn't for him. He was in the Army Reserve for a second. But it's 1961. He gets his start on Wall Street.

He's working at Dreyfus for a bit. And, Jay, I know you've read the book. If you're able to maybe. I know he's working at Wall Street in the early 60s and then 1968 he goes off on his own. Anything notable kind of happen in between those times? I will say it so briefly. So, you know, it's like living in...

His parents live in Outerborough, New York. He's living in an apartment on the east side because he got his first job as an options trader. And, you know, the market was doing pretty well. There was a correction, and things got a little tight for him money-wise. And he's terrified of moving back home because if he moves back home,

his mother's going to pressure him to go to med school. This episode is surprisingly relatable. His mother said the only way he could go... We're both trying to get to Caroline's. We're both terrified of failing and having to go back

to our parents' house. I like that his main driving factor is that blood is icky. Neither of you employs flight attendants anymore. Right, so his mother said the only way he could go home

is if he went to med school again. This is after he's been an options trader for a couple of years. After he tried med school for two years and hated it so to avoid the fate of going back home he quote cut a deal with a middle-aged acquaintance in search of a discreet setting for romantic liaisons in return for rent quote subsidies half the rent carl had to abandon the apartment for hours at a time while his boarder entertained women. So this was like a friend who was like

having hookups in his apartment? Yes. This is in 1962 which means he took the... He's so good at profit, he saw the movie The Apartment and said, that's a way to make money. It means the movie The Apartment is true and it's about Carl Icahn and that's important.

I just like the idea in 1962, Carl Icahn invented Airbnb. Sorry so 60 to 62 he was working as a straight up broker and then after the correction he got into options trading. Very narrow point. Sorry. I'm just imagining his friend leaves the apartment and then says to Carl

Icon what is happiness? Is it that thing we get before we want more happiness um but so i will say carl icon to me much looks much more like a character in mash than a character in mad men yeah like he looks like if you averaged all the psychologists that hawkeye saw right right but so in the 60s he's working on Wall Street and in 1968 he sets off on his own he sets up I believe it was called Icon Carl Icon and Co it might have had a different name but essentially the way Jay explained it to us earlier was he had a wealthy uncle who married rich and this uncle loaned him the 400,000 necessary that was necessary to get a seat on the stock exchange at this point so that you could

execute trades and then this uncle took you know a percentage uh his own kickback for that so like well it's a deal right of course back is yes i think a charge word there right um so yeah so like he's like a successful options trader in the 60s. By the late 60s, he's earning $350,000 a year, which is a lot of money, but also not millions. It's also the kind of money where it's still hard to

just plop down $400,000. His uncle was able to, and so they had that arrangement. I think it's possible that if his uncle didn't exist in that scenario, he could have made it happen some other way. Sure, sure. But it also doesn't hurt to have a well-to-do uncle sometimes. His friends and family LLC.

A little bit, yeah. But so then my understanding, again, I haven't read the book, so I don't know as much about this early period. But according to the New Yorker profile, he was involved to an extent in the RJR Nabisco deal, which was a famous leveraged buyout in the 1980s, which was profiled in the book Barbarians at the Gate, led to a lot of criticism of leveraged buyouts, which are now called private equity, and, you know, these kinds of corporate raiding, essentially. But it's... He's one of the raiders at the time, and so he's one of the people that those companies are looking at,

although he was not the boat that specifically boarded RJR Nabisco. Yeah, he innovated the process. Oh, very much so. But not just already in place. He was one of the people who helped figure out to make it a process. Right. He was looking at undervalued opportunities, this sort of gap between the whole and the parts,

where the parts add up to more than the whole. The company's replacement value is where it's more than their share price. Right. The assets are worth more than the actual stock price currently reflects, so you go and you buy up the stock, and then you can sell off the assets or do something like that. Well, there's sort of a lot of different ways to make money. Yes. If you think a company is selling for more per share, selling for less per share than the value of the raw assets is,

by taking up a share in it, Carl Icahn's idea was that you can basically stir up enough shit to freak enough people out that they will do stuff to make the price of the company go up to match its true value. Right, right. And then you will make money whatever happens. So you can make money that way if you end up buying the company. You can make money that way if they pay you to go away, which is called green mail. You can make money that way if they find another person who will buy the company just to get you out of their hair. That's called a white knight who comes in and rescues the company, is the idea. And then you make money that way. You can also pay money if they get...

Yeah, yeah. You can also make money that way if the company itself gets more proactive about raising its stock price and succeeds in raising its stock price and then you just own a stock that went up right so for carl icon is he's happy to make money any of those ways he finds the undervalued company he invests in it and then he goes to the management and says you are not doing a good job of being management and i have ideas about how you should change his management management gets wigged out and then that is leads to a rise in share price in any of those ways and he wins any of those ways one of one of the like results like one of the upshots in the economics profession anyway just as a side of all this is uh popular

um the economist james tobin made a a new measure of like the sort of like the fair value of a company by saying like well if it's at if the replacement cost of the company all of its hard assets is higher than its market share value like it became known as like the tobin q value okay and so. And so people like Eichen started tracking like the Tobin Q of the market. So it tries to estimate all of the underlying asset value versus what it's trading for. He has a stand-up bit about this.

The jury comes back and says $12 billion of damages. So now Texaco got to pay $12 billion. They don't have $12 billion. It's a great company. The stock used to be $60. The stock goes down to 25. And I buy all the stock I can buy because I figure somebody's going to sell this goddamn thing.

So I buy all this stuff. And now I own all this stock at Texaco. And it was a brilliant moment for me. One of my happiest moments. You know, listening to his storytelling abilities, I understand why Donald Trump likes him. Very similar style.

The punchline is that his life is devoid of joy. I was actually happy for five minutes. Yes. I have just realized that Jerry Seinfeld is not technically the richest stand-up comedian of all time.

Oh, man. So one thing, briefly, which is... What's the deal with eminent domain laws that applies to corporate rating? One thing which is briefly... It's interesting about the sort of being this corporate raider and, like, the boat you're approaching freaking out when it sees the raid coming towards it.

Right. Right, is it really sort of changes the way you think about management in this context right we we often think about like labor versus management and lefties tend to think labor is more sympathetic and management is always looking for ways to f over labor um and there's some of that you can swear here i i know i can i I chose to say F for so it seemed more effective. But Carl Icahn, as an owner, is treating management like labor. Management is. Sometimes the CEOs are acting kind of in their own interests and like funneling a little off to them. Or they like being in power because they like how being in power feels. And they worked for 20 years to be head of the company.

They don't want to get kicked out. And so what that company means to them, sometimes it lines up with shareholder value, but sometimes it doesn't line up with shareholder value. And so that's an interesting dynamic. Well, two things on that. First, just to go back to Greenmail you mentioned. And Carl Icahn has grown such a notorious reputation as a corporate raider that Greenmail happens when essentially he or somebody like him buys a stake in a company.

And then the management or the company will buy back those shares at a premium to make him go away yeah that's green mail because they're afraid of him they're afraid of what he might do to their company and that's another way that he can make money but uh the other part of that is corporate by the way and that's not sometimes carl icon will say what i'm doing is good for shareholders because it's raising the value of the company for all the shareholders and sometimes it does but in the case of green mail that's money that's coming out of the company for all the shareholders. And sometimes it does. But in the case of Greenmail, that's money that's coming out of the company, out of the wallets of all the shareholders to pay just his shareholders. And it's a pretty quick turnaround, too.

Yeah. So when Carl Icahn is draping himself in the virtue of shareholder activism, that is a thing he drapes himself in when it is advantageous to him. And as a cloak, he removes quickly when it is no longer advantageous. Well, that was the other thing I was going to mention, is that Carl Icahn, you know, he used to embrace this reputation as a corporate raider. The book King Icahn is about him as a corporate raider. He apparently used to keep copies of it to give out to people at his office. I believe that.

Yeah. But since that time, he's kind of adopted the term activist investor or shareholder activist instead of corporate raider. So he argues that he produces, you know, billions of dollars for the shareholders, which, again, occasionally he does. But a lot of times his interests don't line up with general shareholders. And they certainly very rarely, in my reading, line up with the actual labor or sometimes the long term health of the company. Very often the long term health of the company.

He does have an interesting sort of fuller sense of what a corporation is as far as like the division between control versus ownership yeah like the managers are all about control right and then their ownership and they can often be at odds with each other as well as labor yeah and so someone like i can can very like uh he's very shrewd yeah and how he attacks this problem of like being, like winning a proxy fight or something. And then he's pitting, you know, dividing your enemies is probably about as important as uniting your friends in a corporate raid. And sometimes one thing he'll do is he'll make people more afraid of another enemy.

And once they're enough afraid of that enemy, then they're willing to live with him. And they'll like they'll in TWA part of the reason he was able to gain control of TWA is the unions were so afraid of the other guy who might take over the company Muhammad Adel

I gotta say based on his track record they were right 15 of the 19 shares in that company no but like you i think you call a corporation a going concern a while ago and that has a long history and sort of like kind of the outside sort of the heterodox economics like what is a corporation yeah yeah and that literally goes back to his thesis of like what is the meaning of the heterodox economics like what is a corporation? Yeah, yeah. And that literally goes back to his thesis of like what is the meaning of the thing?

Is the meaning of the thing to be for shareholders? Is the meaning of the thing to be a business that flies people to places? Like the corporate person, like one of the reasons, one of their obligations, I guess as a legal person

is they have a responsibility to shareholders. Yes. And that's like a legal structure on its own, right? Yes. But they're like in sort of a fuller sense, it's a going concern in that they have lots of different obligations to people who control the company as well as ownership. And so those arguments are one of the ways that all of these battles play out. And they play out differently with each company because each company is operating in a different

circumstance, has its own balance sheet and its own interests, its own politics. It is not just rational self-interest that drives these companies. Sure. One of the things that often will happen and management sometimes is literally trying to maximize management's power at the expense of shareholders. And so when Carl Icahn comes in in cases like that, often what he's doing is genuinely good for the other shareholders.

He'd be fine if it didn't play out that way, and they just paid him to go away, though. One of the very first companies he invests in is a company that makes ovens, made ovens in Ohio, called Tappan. And that company fought him off. Bobby Fisher said it didn't exist. Go home, girl. happen and that company fought him off bobby fisher said it didn't exist and that company really did not like him coming in and they were very threatened by him and it was a family-owned company had been like public it was publicly traded but it was family owned family had the bulk of it um and eventually there was a white knight that came in and everyone ended up making money who was a shareholder,

and the guy who was the head of that company, Dick Tappan, ended up becoming an investor in the next few companies that Carl Icahn rated because he was like, this guy makes money. So if what he's doing is making you money, it's fine. If what he's doing is putting you out of business by making himself money, it's not as good. Right. And so he's had a long career. There's a lot of different individual cases. Of course, we're not going to be able to get to all of them. But I do want to kind of

jump around here. So we said 1968, he sets up shop on his own. 87, he sets up what is still today called Icon Enterprises LP. That's his company. He owns as of 2016 About 93% of it But I want to talk Unless Jay has something else Worthwhile that happens Between 68 and 1985 In 1985 He buys a 20% stake in TWA And this we've kind of been mentioning

But it is one of his most At least publicly significant deals Sure Very briefly Of course There's a company called Anchor Hocking And I'm not going to get into the whole thing about them.

They were in 1982, and this is after he'd made a bit of a reputation that he would buy large stakes in companies and say he was coming after them and wanted changes in them. And after he did that, and you have to file this public filing with the SEC announcing you have a 5% stake in a company

and what your intentions are relative to that company, like the SEC was like the company's parent and asking what you were going to do with your daughter. And so... Back home by 10, please. Exactly. Icon's assistant, or his chief lieutenant is a guy named Kingsley.

And Kingsley said the company, after Icon bought 5% or whatever, the company called us first. They said, we know you have our stock and we want to buy it. I mean, it was like taking candy from a baby. So even before TWA, he has this reputation as a raider? Very prominent reputation. He's taking down company after company.

Goodrich, which is the tire company he made like 40 million dollars in a very short amount of time getting money from them the phrase taking candy from a baby uh reminds me of how monty burns got shot right which is why i wanted to mention that well and also people have described this practice as essentially extortion yeah yeah if you are paying somebody to go away that is essentially extortion right so there's like if there's the white knight path or there's the green mail path or there's the path where carl icon takes over the company or there's the path where uh the management buckles down and like does the work to raise the company's stock price and any of those work they're all kind of good paths for carl icon but the green mail path is the one that's good for only carl icon um so uh twa 1995 he buys this 20 stake and again you might um you might not agree with you know

three 95 1985 85 85 um and you might not agree with some of our attacks on carl icon but uh you might take it from larry summers bill Bill Clinton's Treasury Secretary, certainly not a communist. He described Icahn's TWA profits as, quote, essentially a transfer of wealth from existing flight attendants to Icahn. And that's from Hedge Clippers. And so the story, again, according to Hedge Clippers, with TWA, they blame him for 22,000 layoffs, 36,000 pensions destroyed or transferred to the federal government, essentially. Was that when they went under?

Yes. In 2001, he unloaded, essentially, their pensions. So it is a long story of him and TWA. But it begins in 1985. He buys a 20% stake. And then he takes the company private from a public company. He makes it private. According to Hedge Clippers, he makes $469 million on that deal, but TWA is now saddled

with $540 million in debt. And we've mentioned on the private equity episodes how a strategy of private equity is to rack up debt on companies, which is occasionally used to pay back dividends, but generally just to kind of offset the cost of actually buying the company for the Raider. And so at the time, 4,000 flight attendants lost their jobs. And Icahn made some sexist comments, let's say. Basically, he said that when dealing with, according to Hedge Clippers, when dealing with the 85% female union, the flight attendants union, he said flight attendants were, quote, not breadwinners like mechanics and therefore could afford to take deeper cuts.

Wow. I'm telling you, these stories are funnier than the jokes you can tell. He also, during the negotiations with the flight attendants union, he suggested that if flight attendants were having such trouble making ends meet, they, quote, should have married a rich husband. That's according to the New Yorker. He, for his part, has denied making those comments. I'll give you another one that really happened. I do like the idea of him having a very original take on airlines for his stand-up bit.

His idea of airline food is, he eats the airline. Carl Icahn's an innovator because he's the one who made the airline food shitty. He changed the generation of comedians' takes. That's who he got Caroline's. He was like, you owe me. But so he takes the company private, makes a bit of money. He takes it private in 1988, and then he starts behaving in a way that a lot of people have accused of being much more interested in making himself money than the long-term profits of the company. In 1991, he sells TWA's London routes to American Airlines, and according to Hedge Clippers, this was for $445 million, which many people believe was heavily undervalued.

These are very profitable flight routes. They were also a core part of what was profitable about the company as a whole. So essentially he's selling off these asset stripping, as we've mentioned. TWA is kind of a case study in asset stripping. In fact, if you go to the Wikipedia article on asset stripping, they say that TWA is a case study in asset stripping in fact if you go to the wikipedia article on assets asset stripping they say that twa is a case study in asset stripping um but uh and then a year later 1992 twa files from bankruptcy and interestingly enough usually you would expect owners to get wiped out in bankruptcy but carl icon uh uh is one of the creditors in the bankruptcy court. So he emerges from bankruptcy

with creditors owning 55% of the company. Again, this is according to Hedge Clippers. One of those creditors was Carl Icahn, who owned $190 million of the company's debt. And so in 93, there's a lot of criticism. In fact, in 91, Congress passes some sort of law to try and make it so he's not able to Welsh out of his obligation to the TWA employees

for their pensions. He's later able to kind of do an end run around this. But in 1993, he steps down as a chairman of TWA, but he still gets impatient for his $190 million to be repaid.

So they come up with... By the way, you should step down as chairman after you've driven a company in bankruptcy. Right, right. That's very reasonable. You know, you would think so, but since we started doing the podcast, we have learned that sometimes you make

a hundred-some million dollars and, you know, these kinds of things. Whatever he had leverage leverage he used as leverage yes that's that's what he did um but so according to uh hedge clippers position is they come up to pay back carl icon his 190 million they come up with the caribou ticket agreement which is pretty insane to me but it allows carl icon to buy any ticket that connected through st louis for 55 cents on the dollar and then resell them at a discount on his website lowestfair.com which is today price line and they say hedge clippers the deal allowed icon to bleed twa dry by making it compete against

itself and uh and so instead of just owing them instead of twa owing icon reorganized twa owing icon 200 million dollars they get like 50 or 100 million dollars stripped out of their finances for years and years basically until they don't exist anymore yes and so uh and then yes in two yes in 2001 twa announces its third bankruptcy and then they get purchased by american airlines which results in more massive job cuts for twa workers um and then two years after the merger uh uh oh yeah no in 2001 writings on the wall at that point pretty sure yeah uh and then 2001, the Pension Benefit Guarantee Corporation, which is the federal government agency that essentially takes up pensions that are not able to be funded by the private sector. They assume responsibility for all of the pensions that ICON was supposed to still be able to pay up, which, again, is the wipe out of more than 36,000 pensions. Wow.

So, yeah, that's about the story of TWA and why you no longer fly on that airline. Can I read a quotation? Of course. This is Icahn in 1985, before he became head of TWA, when he's still fighting to take ownership of it. There's a hearing at the House subcommittee on aviation because TWA is trying to get some legislation that would make it harder for him to take

over the company. And I can testify quote, TWA's management continues to claim that I would seriously damage or even destroy the airline. This would make me both a liar and a fool. And I am neither. My reputation as a man of my word is something I would not risk for any transaction. He would later go on to tell the New Yorker, no, I did not engage in insider trading.

He also said, I'm a man of my word. I promise that I will not perch on Long Island with an anti-aircraft missile and shoot down a boeing 747 in this airline traveling from jfk to rome yeah look can i say something that has nothing to do with what andy just said i'm saying he shot down twi flight 800 that seems like it would be against his interests in all conceivable ways i don't know maybe i don't know business good trailing off there i appreciate it okay just briefly so this is the next quotation i'd like to say on this point. The Carl Icahn being outraged and proud of the man of my word stuff, right? This is from King Icahn at page 196.

Skadden attorney, this is in negotiations between the TWA management and Carl Icahn. Skadden attorney for TWA reminded Carl of his previous assurances that if a better bid than his was put on the table, he wouldn't be the spoiler. Said the attorney, quote, you gave me your word, you wouldn't be the spoiler, and now you are being just that. You said you were a man of your word, but you are not behaving like one. If you do this, you are only 50% a man of your word. Indignant, Carl shot back with examples of where he had kept his word. The attorney nodded and said, quote, okay, Carl, let's say you are 75% a man of your word.

Come on, Icon countered. Give me 80%. I'm at least 80% a man of my word. A negotiator to the end. So continuing the story of TWA, just briefly before we move on here, I said the Wikipedia article article and it is on corporate rating or sorry, asset stripping. It just says that icon at TWA, the particular corporate raid that he did formed the idea of selling a company's assets in order to repay debt and eventually

increase the raiders net worth. So it is literally a case study in asset stripping or corporate raiding. And by the way, while he's doing that, you remember earlier in the thing, Andy was playing the clip of him buying stock in Texaco? Mm-hmm. He was buying stock in Texaco while he was chairman of TWA.

Oh, really? And he was using the assets of TWA as part of what was his portfolio of assets to make a run at Texaco. Wow. And other companies as well. And so just as we mentioned, TWA, Hedge Clippers, attributes to him 22,000 layoffs, 36,000 pensions destroyed or essentially transferred to the federal government.

And Jay, you had a very great quote about him taking a flight in the 1980s. Yes, this is when he's in charge of TWA. He's been there for about a year. This is New York Times, 62286. When he showed up at a TWA counter to check in for a flight, a ticket agent entered a note in the computer that said the passenger needed assistance because he had, quote, no heart. It went on to say...

Well, I really wouldn't care to scratch your surface, Mr. Crowley, because I know exactly what I'd find. Instead of a heart, a handbag. Instead of a soul, a suitcase. And instead of an intellect, a cigarette lighter, which doesn't work. And the part where the cigarette lighter doesn't work is the only part of that that's unfair.

Because the cigarette lighter definitely works. And then he responded, you know, I went to a tough school in Queens. We used to beat up the little Jewish boys. I'm personally impressed that they got the music into that note on the computer. She actually scored her note, the flight attendant. This is very effective.

Right, in the early 2000s is kind of when he finally walks away from TWA after setting up his discount flight website that destroys it. So he has from 85 to 91, 93, he is a chairman and owner of the company and manager, by the way. So he's acting as manager in a way that he usually doesn't. And then in 93 to 2001, he's fucking with TWA, but as a creditor, not as an owner. Gotcha, gotcha.

Yeah. A couple of brief quotations, or snippets from the period before the 2000s. So this is when he's making a run at Texaco. Fun fact, one of the members of the equity committee at Texaco in the late 1980s was Wilbur Ross, future Secretary of Commerce under Trump and an interesting person. Self-proclaimed billionaire. He's a self-fabricated billionaire. He's a self-saved billionaire. Not self-made, but self-saved uh anyway so there's a there's an annual shareholders

meeting of uh texaco in tulsa oklahoma which is not the friendliest of territories from a tough for a tough boy from queens um and wilbur ross said quote the night before texaco had a dinner for texaco retirees there's a quote wilbur ross saying it on record in car in king icon these people detested everything Carl stood for. Wall Street, ethnicity, financial engineering. This group of Bobby Fischer's friends. I feel like one of those was maybe more prominent than the other two. I think it was a single tapestry in their minds, possibly.

But it was like, that caught me off guard, even within a book of things, it caught me off guard. And then the other, this is a quote about Carl Icahn's negotiating strategy. Again, from King Icahn. This is from the chapter about Texaco. So Carl Icahn is talking to the head of the equity committee, which is a committee made up of other shareholders whose job is to make sure Texaco. So Carl Icahn is talking to the head of the equity committee which is a committee made up of other like shareholders whose job is to like make sure Texaco operates according with shareholder interest is the idea. They're working through how to change the bylaws to make Texaco's management more

beholden to shareholders and they have sort of different views on what the company should be. So Carl Icahn is like let's maximize how much i can sell this for tomorrow and the other guy is like my family has owned stock in texaco for centuries right right a century and we want to continue doing that it's like stewardship versus cash and crap okay so at one point carl said why don't you like me and excuse me sorry and norris is the head of the equities equity committee answered i never said i don't like you we both have similar desires for changing corporate governance rules but we have different bottom lines texaco has 52 000 employees and i want the company to remain viable in part

for them but you'll come in here and rape the company oh and carl icon said i'm that's not very politically correct this is what carl icon said quote here's why that's problematic is it carl icon said quote i'm not going but you'll come in here and rape you'll come in here and rape the company carl icon said quote i'm not going to do that. If that's what I wanted, I'd have to raise $13 billion, and that would take months. So I think that gives you a sense of the day. Yeah, definitely. That's also what he says at dinner dates. And so Jay mentioned Texaco.

He was eventually successful in forcing a large shareholder buyback at texaco which benefited him immensely and other shareholders yeah um but um so i guess we probably we don't have time but i do want to talk very briefly about a couple other companies before we get into the donald trump insider trading kind of stuff as well as the trump casino but um according to hedge clippers uh carl icon bought a a stake in Time Warner in 2005. He wanted to split up the company. That didn't happen. But at his instigation, Time Warner laid off about 1,100 people. And eventually, in 2006, the company reached a deal with him where Time Warner instituted a $20 billion share buyback and then put some of his people on the board and cut about $500 million out of its cost base. And, you know,

we've talked about this briefly on the podcast, but it should be noted that during the New Deal, share buybacks were outlawed as illegal price manipulation of a company. And a lot of the Trump's tax cuts have been going into share buyback. So I think it's at least debatable how much, certainly they benefit shareholders, but how much they benefit the long-term health of the company. And the head of the SEC, looking at whether what companies are doing is proper or not proper, the head of that SEC interviewed with Carl Icahn to get that job. Okay. And so that's the time warner and again uh hedge clippers looked at uh 10 companies so we'll put it on the the tumblr so you can have a look uh and they found

you know as we mentioned uh these 100,000 126,000 pension or health benefits cut uh more than 35,000 layoffs um so yahoo was the other case in 2008 carl icon began buying yahoo stock and then he's trying to sell yahoo to microsoft eventually he is successful in selling yahoo's search engine to microsoft but uh it's kind of the chocolate milk you're talking about yeah uh but kind of the the shady thing that happens between 2008 and the sale in 2010 is yahoo uh under carl ikon's guidance or at least under his pressure yahoo changes their severance program in event of a takeover so they essentially wipe out severance pay for 15 000 workers uh who uh would have been affected by this and eventually about 1500 workers are laid off but 15 000 have their

severance pay cut um and you know not long after uh microsoft buys yahoo search capabilities and the layoffs come carl icon dumps his shares because his work is done if you treat management like labor what do you treat labor like right right um and uh um i guess we'll just kind of skip ahead to um the trump taj mahal and then the trump uh white house because i think those two kind of feed into each other and uh it's it's a really fascinating story the uh trump taj mahal which was the atlantic city casino that donald trump opened in 1990 according to federal indictments. That's my favorite band. The Trump Taj Mahal was, quote, the preferred gambling spot of Russian mobsters in Brooklyn.

And apparently a member of the 14K Triads was, yeah, so a Senate subcommittee looked at this and found that a member of the Trump Taj Mahal's VP Foreign Marketing was tied to the organized crime Hong Kong 14K triad linked to murders, extortion,

and heroin smuggling. And he at least worked. I'll be right back. He at least worked at the Trump taj mahal it's funny every time it's funny every time he at least worked at the trump taj mahal from 1990 to 95 so by the way i could have sworn a 14k was the thing you had to file at the end of every quarter when i was doing the research for this episode i got very nostalgic for the video game sleeping

dogs and sad that they will not make a sequel which uh is neither here nor there but it's about the triads in hong kong oh good game ah but so uh one of our listeners will get that that listener is sean andy let sleeping dogs lie look it actually the other thing i did with my research time was I signed a change.org position to get Square Enix to make sleeping dogs too. So it's like, I, you know, if I won't stick up for like end global warming or whatever, these other change.org positions, but I am one of the 400 people who want to play the sequel to sleeping dogs.

Be the change. Once it gets enough signatures. Be the change. Once it gets enough signatures. Be the change.org. Be the change.org. But so Trump's casino, we mentioned the organized crime ties. It also becomes endemic for money laundering and would settle with the federal government in 2015 for essentially ignoring money laundering laws for its entire existence.

There is a ton of dicey stuff with all of Trump's building. It's staggering. It's staggering. Especially at the craps table. Literally, the building is staggering. And so it's a fascinating story with Icahn and Trump here because essentially the casino is owned through the Trump Entertainment Company. And according to Fortune, Carl Icahn eventually becomes the sole lender to the Trump Entertainment Company.

And according to Hedge Clippers, Trump was paying Icahn 12% interest, which was like double the 6% he'd been paying earlier. That's like in the 90s. Yes. Okay. And this is like Ica the icons able to juice i believe according to the hedge clippers at least 70 million over four years just because of this interest payments but so eventually icon is trump's sole lender but uh he buys he straight

up on the casino uh yes on uh on trump entertainment which owns his casinos, I guess. Eventually, in 2014, Carl Icahn buys Trump Entertainment. And according to Hedge Clippers, from 2010, I believe, to the bankruptcy in 2016, the second bankruptcy, Carl Icahn extracted $350.5 million out of the Trump casinos in Atlantic City and sent that money back to Icahn Enterprises, according to Hedge Clippers, while forcing workers to take deep cuts. And we'll talk about those very quickly. It's like the famous saying, the house always wins, unless it borrowed money from Carl Icahn. But yes, so he's making a lot of money on interest payments on this debt. But he's also Carl Icahn, as well as Trump before him, but Carl Icahn in particular, he's playing hardball negotiation with the 3,000 workers at this Trump casino who were union workers. And according to Hedge Clippers, Icahn implemented an overall 35% reduction in compensation for workers who average, at the time, they averaged about $12.50 an hour.

These are casino workers at Trump's casino or now icons. They were making about 1250 an hour He also eliminated health insurance plans. He eliminated more than 3 million in pension contributions He eliminated paid lunch break for employees at this casino. Good as he think he is Jeff Bezos And he also permitted unlimited subcontracting for food and beverage service at the casino and all of this is essentially a way of doing the uh end run around uh the unions he also include increased employee workloads the hedge clipper says house clean housekeepers at the casino were now expected to clean 16 rooms a day up from 14 rooms a day and uh the union uh appealed where you can exactly uh the union appealed this uh 2014 bankruptcy which is where carl icon came in

and bought up the remnants in bankruptcy and then started squeezing the union even harder the union appealed that the supreme court chose not to hear the case and um carl icon fought back and forth with the union before eventually shutting it down in, I believe, October 2016, resulting in 3,000 union workers being laid off. And he would later in 2017 sell the remnants to Hard Rock. Yes, it is now the Hard Rock Hotel and Casino Atlantic City. No wonder the white working class is so angry um briefly on the trump casino uh trump uh at one point was insistent that it would it had more value as long as it was called the trump casino of course in icon's opinion the only real downside to shedding the trump name was the expense that would be associated

with changing the signage um but yes yes so and then during icons operation from 2014 to late 2016 the US Department of the Treasury financial crimes enforcement settled the investigation for money laundering with a 10 million dollar civil fine for quote significant and long-standing money laundering violations which were

described as quote willful and repeat it that's like not even a slap on more than one slap on a single knuckle and long-standing money laundering violations, which were described as, quote, willful and repeated. That's like not even a slap on more than one knuckle. That's a slap on a single knuckle. And basically they were just ignoring all record-keeping and reporting requirements of the Bank Secrecy Act. But it is interesting. I mean, you know, just a corporate raid

where Icahn is, of course, paying himself this hundreds of millions in interest payments while squeezing the workers and labor and eventually wiping out about 3,000 union workers and then selling off the remnants to Hard Rock, who can now contract the thing without union workers. So it's a typical tale of what has happened to American workers with both corporate raiders, private equity, etc., etc. And consistent with the spirit of rock and roll. And I think we've drilled this point into the ground.

He puts the hard in hard rock. Throughout the course of this podcast. But the significance of the hard rock story is that this is kind of the genesis of Trump and Icahn's relationship, even though they have a partial falling out and Trump is clearly a little hurt by Icon saying that his name on the casino is worthless.

Icon also had some sort of quote about like, how can the name be valuable if all the Trump casinos keep going bankrupt or something? That's a very good point. He's got that big dick energy. I mean, like, I don't respect him, but he does have game. Well, and that's the thing.

Like, Icons is a success story and trump admires that right and uh well yes you can argue about if icon has created actual value for the economy but certainly within the rules of the game as they are written he has made a lot of money yeah whereas trump has uh well at many points been been bailed out by creditors and just had his name, but his actual control of these assets stripped and is clearly not worth as much money as he claims to be worth. I will say, though, for those creditors bailing him out, good long-term investment. Yeah, just as a play to get Gorsuch. The Gorsuch play, they called it. But so because Icahn was Trump's

sole creditor for a time and certainly has a relationship with the guy, Trump named him not long after his election. He named him to be the special advisor to regulation in the Trump White House, which is a position he would hold from, I believe, March 2017 to August 2017. And then he would step down when the New Yorker began looking at a clear case of insider trading that he engaged in from this. And then the Trump White House distanced itself from it. They said he had never, in fact, been there.

Yes, they did. We've always been at war with East Asia. What? I do like that it's like just clear tweets from Icahn announcing that he's coming on board and from Trump announcing that he's coming on board. And then when that happens, stocks in companies that Icahn has an investment in flourishing as a result. And derivatives markets changing just based on that. All right. Well, so the two cases

of insider trading the quick one is the the steel stocks so according to think progress they wrote this article in march 2018 icon dumped about 30 million dollars in steel related stock uh about a week before trump announced tariffs on steel and uh Trump has, for the record, said that he regularly... What great timing. He regularly speaks with Icon. He's a comic, you know, he's got good timing. Can't get to Caroline's without great timing. And so the ThinkProgress story...

How do you get to Caroline's? Leverage, leverage, leverage. So the ThinkProgress story is that Icon systematically sold off nearly a million shares of Mantewalk Company Incorporated between February 12 and February 22, 2018. It is a leading manufacturer of cranes and other heavy-duty equipment, and it is highly dependent on steel, much of which is imported uh seven days after this sell-off trump disclosed at a white house event that he was planning a 25 tariff on steel imports so uh this kind of 30 million dollar sell-off has been alleged to be insider trading because as we know trump and icon talk at least semi-regularly and like just a phone call late at night like

what did you think of the news today right like it's like one of the things they might do Trump could say something like I'm thinking about these steel tariffs I'm thinking about putting them in Not even He literally could not be thinking in his head I bet ICON uses this information Right, right, right

It's also possible that phone call didn't happen But you know It's suspicious Yes And that is how this went down And so Hey there I'm Chris Higgins Every time The other story here is a little more complicated

but i think we can truncate it it's the subject of the new yorker long piece that would eventually force the white house to not only fire carl icon but erase his existence joseph stalin style by saying that he had never worked there. They took a photograph of a regulation with nobody standing next to it. But so according to the New Yorker, the actual title that Carl Icahn came in with was, quote, special advisor to the president on regulatory reform. This was announced in December 2016 before Trump was formally sworn in. As we mentioned, he held this title until late August 2017. And so Carl Icahn had a company that he owned called CVR Energy, which was a refinery, according to the New Yorker, under the Renewable Fuel Standard, which was a law passed under George

W. Bush to promote ethanol and biofuels, because ethanol and biofuels have an outsized influence in the presidential nominating process, thanks to Iowa and corn subsidies. So this law requires refiners such as Carl Icahn's to either blend ethanol into their products or to purchase credits known as Renewable Identification Numbers, or RINs, from refiners that do. And so Carl Icahn's company didn't blend ethanol, but they were buying these RIN credits. And the RIN credits progressively became more and more expensive. So under the Obama administration, Carl Icahn was frustrated that he couldn't get the EPA person for Obama on the phone to complain about these. And so he made it a big issue with trump and in fact specifically spoke to trump about it

and then weirdly enough in september before uh the election uh the trump team released a white paper which uh the new yorker alleges uh might have been written by carl icon which uh uh essentially said that they were going to do away with this uh fuel renewable fuel standard requirement via executive order then when questioned about it the trump team uh re-released the paper removing that bullet point and being like no there was a mistake we weren't actually going to do that um and so what smooth real smooth operators right and so what happens is um in february 27th uh this is right after trump's inauguration uh 2017 uh the news leaked that carl icon had had a sit down with um the head of uh one of the um industry groups that essentially defends this uh um renewable fuel standard and uh this guy according to new

yorker alleges that carl icon told him directly that the president was going to issue an executive order ending this renewable fuel standard. And so he says that he was kind of faced with this, you know, because Carl Icahn has this title, a special advisor to the president and talks with the president regularly. He was kind of faced with, OK, well, the president is going to do away with the standard. He believes he's speaking for the president regularly he was kind of faced with okay well the president is going to do away with the standard so he's speaking for the president exactly so he says all right well since this is already going to happen i have to negotiate in a way to try and save something when carter page goes to moscow and says i am interested in having better relationships with moscow you know he's speaking for the president right and so according to the new yorker it was the this group is called the renewable fuels association uh and on february 27th this news leaked that the renewable fuels association after speaking with carl icon uh announced it would end its long-held opposition to changing the point of obligation and side with icon and his point to

shift the obligation away from the refineries like CVR, the one Icon owns. And the idea of this is that essentially Icon wanted to move the renewable fuel standard so other people have to buy the credits. And so this news leaks out to Bloomberg, which four days later, Bloomberg News leaks the story. And according to New Yorker, corn and gasoline prices go berserk, as understandably they would. And so a weird thing happens where during this time, Carl Icahn has, in the lead up to this, he's begun selling these RINs. Because again, these RINs, these renewable credits, these are traded on the market. So he begins selling these things. And then the price collapses as soon as this announcement comes out,

and then he begins buying them back much cheaper. So it is like, it's a pretty clear case of... There's at least an argument. Right. There is at least a theory of how he was manipulating the market. Not just like trading on insider information, but making the market. Yeah, I mean, he knows how the market. Not just like trading on insider information, but making the market. Yeah, I mean, he knows how to manipulate.

He knows what to say and do to get his way. And like his future wife said at that point, he's a bull. He doesn't even have to kill the regulation to move the market on the noise that the regulation might get killed. And then if that possibility of it changes the price, he can use that change in price and arbitrage that change in price and arbitrage in price is a thing he's extremely good at.

Does that mean that's exactly what he did here? It doesn't mean that for sure, but it means it's worth looking into. Right. And so essentially the story for now ends this way. In May 2017, various senators, mostly Democrats, obviously, they write to the heads of the SEC, the EPA, and the Commodities Futures Trading Commission, calling on them to investigate this.

And so according to The New Yorker, in May the... And the SEC was like, we don't do that. Right. I mean, literally, yes. As I learned in my interview, Carl Icahn is an important person. So in May, according to New Yorker, Commodities Futures Trading Commission replies to the senator's letter saying the agency would not be investigating Icahn or his refinery CVR

because RINs, even though they are commodities, do not trade on the futures market and therefore the agency has no jurisdiction to look into the matter. And then the New Yorker opines that, quote, by this logic, the $15 billion market for renewable fuel credits is not regulated by any government agency. And we have...

That's the one he's a regulatory advisor. Right. And that's the first thing he looks at. By the way, he's a regulatory advisor for all regulations. Yes. The one he goes at hard in the month after he is, after his president is inaugurated and he's the advisor to the president about it, is this one specific thing on this one very narrow regulation that affects a refinery that costs him 200 million a year.

Yes. That's the regulation he cares about. Yes. Of all federal regulation and we mentioned earlier in this new yorker profile they also mention as trump was picking his nominees for the cabinet including steve mnuchin and the head of the sec scott pruitt at the epa all of these people had to meet with carl icon and be interviewed and trump of course listened to suggestions on this carlhn made a lot of quotes praising both Scott Pruitt and Mnuchin and such so it

is interesting where it's like okay so they get this letter to look into this guy who got them their job and then they're like no we're not going to be invested in this guy I feel like at that interview he just like pushes a piece of paper across the table and just says regulations question mark in two boxes yes

no maybe and they like piece of paper across the table and it just says regulations question mark in two boxes. Yes. Maybe. And they like crumple the paper up and throw it to the ground. You've passed. But so just one other thing from this case. Elliot Spitzer, the former New York State Attorney General, says that

even if the federal government won't look into this the New York State Attorney General should have jurisdiction to look into this. So if you're listening and you live in New York, please vote for Zephyr Teachout for Attorney General. Can I add a happy point on this? Of course. So in November 2017, Carl Icahn got something, which was a subpoena from the Southern District of New York for his role as a Trump advisor relative to this stuff. Oh, that's good.

So whether that leads... SDNY is looking at him? Yeah. Whether that actually leads to anything, who knows? But, you know, when I get a subpoena, I hire a lawyer. This podcast is financed by Salino and Barnes. All right. So unfortunately...

Well, I look forward to the new career of the U.S. attorney in charge of the Southern District of New York. Sure, sure, sure. He's going to be external vice president at CVR. I love the plot of You Got Served 6. They're dancing. Oh, they're dancing, all right. Unfortunately, there's just too much with Carl Icahn to get to everything but we can kind of

wrap up here with just what we haven't been able to get to and what we've kind of learned about the man but I would for example this audio from his divorce proceedings oh you poor sad multi-millionaire I feel so sorry for you wide underestimate you are nothing but a suit. So one interesting thing I found, I believe this is from the New Yorker piece, when people tried to cite Carl Icahn's charitable contribution, the main one they cited was that he has built eight charter schools in the Bronx. And if you are not aware,

charter schools are for-profit operations. Right, right. And his wife runs these tourist schools, and I believe his sons and other family members are part of that organization, which is a very common tactic by billionaires to employ your family in your not-for-profit. Well, he's also done a lot to encourage Latino business owners,

entrepreneurs, specifically through Herbal Life. Oh, yes. We talked about it a bit more on the Bill Ackman episode, but he was involved in trying to short squeeze Bill Ackman on Herbalife and made a big investment in what is, by all regards, a pyramid scheme. Right, right. Allegedly. Well, there was a FTC settlement, and now, under the terms of that, they promise to only be 30% a pyramid scheme just like Carl Icahn is 80% honest

a man of his word we didn't have time to get to this but one of my favorite things is that in the 1990s Carl Icahn attempted a corporate raid for control of Marvel Comics and the company's CEO at the time called, it's likened negotiating to Carl Icahn

with negotiating to terrorists. Yeah, no, that makes sense. And I just like the idea of Carl Icahn. He was not successful in his takeover of Marvel Comics, but I do like the idea of him taking over Marvel Comics and then absent stripping the Batman universe. Like he sellsman's dead parents to dc comics or no batman's dc sorry now people are gonna i was gonna say we're gonna get we're

gonna get some angry you know i think we can all we all understand if you're watching this if you're listening to the podcast you know that sean mccarthy is a sleeping dog's head yes that is where his passion you know people some people like comics and everyone has their thing he sells spider-man's uncle ben to dc comics and he sells with great leverage comes uncle ben for free he sells carnage to 20th century fox um but yes takes away luke cage's pension can i on the charity thing thing, make a brief point? So one impressive, one good thing about Carl Icahn is he did sign the giving pledge. Right.

But he has not yet decided how to distribute the money. There is an article from Inside Philanthropy, April 6, 2015. The title of the article is, Carl Icahn will give away $20 billion. But when? And where will the money go? Because he hasn't done it yet. Because Carl Icon uses the money as his ship that he raids other ships with. Right.

There's literally a quotation, which I think is such a key to understanding Carl Icon. My money is my army. I need my army around me. Because the money is how he buys the stock stock which is how he intimidates and pressures the companies that he intimidates yes and the money is his score yes it's not just the score it is also the troops right right right that's the thing that he uses to go at the companies and so uh that's a key to understanding it the money is the troops yeah and then in his stand-up set he said now give it up for the troops yes he wants people to support the troops absolutely and so i guess uh to summarize there's a interesting quote from uh mr icon um according to the new yorker uh mark stevens who

we mentioned is icons biographer and he wrote the book King Icon he says Carl Icon once told me quote I don't believe in the word fair it's a human concept that became conventional wisdom spoken like a true philosophy graduate but you know that kind of sums up the guy he just

he loves business he loves making a profit and he regards his almost 20 billion dollar fortune as a way of keeping score and he sold his yacht because while many people would retire with that much money there's nothing that brings him joy like late night negotiating and squeezing companies and all this and the consequences for labor and people under him be damned um so i guess anything else we learned uh Carl Icahn? I'll give you another one that really happened. In all of his public speaking, whether it's the commencements or just investor talks and stuff,

he always is going for a laugh, and I think one of Carl Icahn's, one of his best skills is he can talk at you until you go, I guess that was technically funny. He is very good at, you know, belaboring the point long enough to where you're like, if I don't laugh, this guy's going to continue talking at my face right now. And he does impressions.

And here's how Jameel comes in. Car, car, car. You can sell a car, do you plan? He's wearing a hat and squinty glasses while he does this. Look, I guess keep your eyes focused on the New York State Attorney General and the Southern District of New York. Zephyr Teachout. Yeah.

Zephyr Teachout. Yeah. And we'll see if the alleged insider trading comes to anything, but Carl Icahn is an innovative corporate raider, a brilliant stand-up comedian, and you can catch him at Caroline's. Let's make sure to plug Carl Icahn's dates before we get out of here.

Be sure to rate and subscribe to his podcast. You might catch him at Laughing Buddha. He does spots there, too. He does clubs and colleges all around the country. I just enjoy this podcast before he sells Andy Palmer. It would be great if, it turns out out Carl Icahn owns Laughing Buddha. That actually feels very like him. But anyways, before we get out of here, Jay Welsh, thank you so much for being here.

Thanks so much for having me. Anything to plug, we'll certainly link to whatever you want in the description. You can follow me on Twitter at WelchJay. That's all I got. All right. Well, Jay Welsh, a very funny comedian in the New York area, and he helped us out a lot with this episode. So thank you.

We'd love to have you back in the future. And thanks for listening to Grubstakers. We'll be back next week. Sean P. McCarthy here. Andy Palmer. Yogi Pollywalt. Steve Jeffers. Thanks for listening.

Bye, everybody. All right.