NEW YORK — Corporate raider Carl C. Icahn acknowledged Monday that he is the subject of a Securities and Exchange Commission investigation into activities related to corporate takeovers.
The acknowledgement, made in a routine SEC filing by Trans World Airlines, of which Icahn is chairman, is his first public disclosure that he is the subject, rather than only a witness, in the SEC investigation inspired by the activities of stock speculator Ivan F. Boesky and other Wall Street investment figures and traders. The disclosure indicates that the SEC's inquiry may have broadened beyond insider-trading issues.
In its SEC filing, TWA disclosed also that it is ending, at least for the time being, its $1.6-billion campaign to acquire USAir Group. The move appears to clear any remaining obstacles to USAir's $1.59-billion acquisition of Piedmont Aviation, a merger that would create the nation's seventh-largest airline and one of the most important in several East Coast markets.
TWA disclosed in the filing that on Nov. 12 the SEC issued a formal order of investigation "to determine whether any persons (including Carl C. Icahn) have engaged in certain acts" in violation of federal securities laws "in connection with the acquisition of more than 5% of the shares of certain unspecified issuers and the disposition of such shares."
Under federal law, anyone who acquires 5% or more of a corporation's stock must disclose his or her holdings--and any subsequent change--within 10 days.
SEC and legal sources said the commission generally issues an order of investigation on the request of its enforcement staff. The order empowers the staff to issue subpoenas for documents and testimony and does not necessarily indicate that an inquiry will lead to any formal charges. Typically, the staff makes a presentation of preliminary evidence to the commission when requesting the order.
"Obviously, you can't have a fishing expedition--there has to be some evidence there," an attorney familiar with the routine said. "But it can be minimal."
As described in the TWA document, the order of investigation represents a widening of the commission's interest in takeover practices beyond insider information. Among the issues known to concern the SEC is the abuse of the 5% rule by stock speculators, raiders or others working secretly in concert to accumulate large share holdings in potential corporate targets.
Federal law forbids people to trade securities on the basis of material information not available to the public. The SEC's recent campaign against insider trading has led to charges against investment bankers, lawyers and others who learned such information in the course of their work.
The SEC announced on Nov. 14 that Boesky had agreed to pay $100 million in penalties and fines and to plead guilty to one federal felony--so far unspecified--to settle charges that he had engaged in insider trading. Boesky agreed also to cooperate with further investigations.
Since then, Wall Street professionals have conjectured that Boesky would implicate in a pattern of wrongdoing a large number of securities traders and investment bankers, as well as some of the corporate raiders whose takeover campaigns fueled the stock trading in which Boesky specialized.
Pair Are Neighbors
Icahn is a prominent member of the latter group, as well as a neighbor of Boesky in the northern suburbs of New York City. The two men have been linked before: After the epic takeover fight involving Phillips Petroleum, of which Icahn was a key suitor and Boesky a heavy speculator, Icahn testified that Boesky had kept in close touch with him from his neighboring estate.
After Boesky first learned from Icahn that the raider had acquired a sizable stake in Phillips, "Ivan kept calling me," Icahn testified in a court deposition, which was sealed but a copy of which was later obtained by The American Lawyer magazine. Boesky, who held a stock position that could be rendered profitable only by a takeover assault on Phillips, urged Icahn to begin such a fight and later sold the raider some of his own Phillips stock, according to the magazine's version of the deposition.
Icahn has broken his public silence on Wall Street's insider-trading scandal only once before. That was on Nov. 19, when he acknowledged having received "certain inquiries" from the SEC in the wake of Boesky's plea agreement, but he added: "No allegations have been made against me by the SEC, and I have no reason to believe that any will be made in the future."
In a letter to TWA employees that was issued to the press, he denied having entered into "any business 'arrangements' or partnerships with Mr. Boesky with respect to the securities of any company."
Denies Illegal Trading
Icahn said also: "I should like to state categorically that I have never traded on inside information nor have I ever had any dealings in any way, shape or form with Dennis Levine."