As an FBI and SEC investigation of Carl Icahn for insider trading is said to hit a snag, the move raises questions as to why hedge funds are being constantly targeted but not the large banks?
Insider trading case from 2011 being dredged up
The FBI and SEC are investigating if golfer Phil Mickelson and famous Las Vegas sports gambler William “Billy” Walters traded on inside information from the 2011 takeover of Clorex, which turned out to be a rare loss for Icahn. The government is said to be relying on electronic eavesdropping – cell phone calls, e-mails and such – as well as human sources to build their case.
For his part, CNBC is reporting this morning that Icahn said he never met Mickelson and did not provide inside trading information. In the Wall Street Journal Icahn said “We do not know of any investigation. We are always very careful to observe all legal requirements in all of our activities.” Speaking to the Journal Friday, Icahn called the charges “inflammatory and speculative.”
FBI questioning suddenly going public at golf tournament – Icahn
The case was made public when two FBI agents visited Mickelson to question him while he was playing in the Memorial Golf tournament this weekend, an event seen by his fans and the media. “Why couldn’t the FBI approach Mickelson at home? Why did it need to be so public?” questioned a source close to regulatory probes. “The case is from 2011, what took so long for them to question Mickelson, and couldn’t it have waited until Monday?”
“This is the way you ruin someone’s reputation,” said CNBC’s Jim Cramer, discussing information on an investigation being released without charges being filed. “It’s not the American way.”
Pressure to “hold Wall Street accountable” strangely misses the big banks
Speculation is the DoJ is receiving pressure to “hold Wall Street accountable” and rather than go after the big banks, which has the strongest political lobby in the history of democracy and unmatched legal assets. Hedge funds don’t spend nearly as much money on lobbying and are usually driven by individuals rather than a corporate controlling business structure.
“There are plenty of big bank cases with much more concrete criminal information,” the source said.
The FBI case centers on Icahn potentially providing information to Walters, who passed along information to Mickelson. In the report Mickelson said he is cooperating with the investigation and his lawyer said on Friday that “Phil is not the target of any investigation. Period.” He added that an FBI agent had told him Mr. Mickelson wasn’t a target.
Walters is a well-known but reclusive sports gambler who expressed skepticism of Wall Street in a rare 60 Minutes years ago. In the interview Walters had said that he didn’t trust Wall Street investments, having been stung by Worldcom, Enron. He has complained Wall Street is populated with either scammers and those being scammed. “If you’re sitting around a table and you can’t identify the mark, you are the mark,” the gambler said.
Indications in the Wall Street Journal is the press leak has damaged the investigation’s ability to collect information via wiretaps, as sources of information have dried up.