Carl Icahn, Board Members Sued Over Investment Firm Margin Loans

Carl Icahn and other board members of Icahn Enterprises LP and its affiliates are responsible for harm to the investment firm stemming from the billionaire’s allegedly undisclosed personal margin loans, according to a new derivative suit.

Icahn Enterprises sustained reputational damage as well as the costs of defending several securities class actions and settling Securities and Exchange Commission charges, investor Harvey Gitlin says on behalf of the company. He filed his suit Wednesday in the US District Court for the Southern District of Florida.

The harm came from the directors’ nondisclosure of Icahn’s $3.7 billion worth of margin loans; an “an undisclosed scheme to use heightened dividend yields as an inducement to buoy or inflate the trading price” of Icahn Enterprises’ depositary units; and a practice of “using money taken in from new investors to pay out dividends to old investors,” as alleged in a 2023 short-seller report, Gitlin says.

A proposed class action filed shortly after publication of the Hindenburg Research report remains pending in the Southern District of Florida.

Meanwhile, an SEC probe found that Icahn didn’t properly disclose how much he was borrowing against his stake in the company. On Aug. 19, the commission announced a $2 million settlement with Icahn and his firm, with Icahn to pay $500,000 and the company to pay $1.5 million. Icahn and Icahn Enterprises didn’t admit to or deny the SEC’s findings, but they agreed to cease and desist from future violations, the agency said.

Gitlin seeks damages and corporate governance reforms on his claims of breach of fiduciary duty and contribution.

Icahn Enterprises didn’t immediately respond to a request for comment submitted through its website.

Jose Sosa, who practices in Palm Beach Gardens, Fla., and Federman & Sherwood represent Gitlin.

The case is Gitlin v. Icahn, S.D. Fla., No. 1:24-cv-23390, complaint 9/4/24.