Charter School Proponent Carl Icahn Probed For Insider Trading

Now for a charter school insider trading story.

No, this is not about Whitney Tilson and that funky little Barnes and Noble thing from 2012.

This is about Carl Icahn, some sports and gambling pals and Clorox:

The feds are investigating whether golf legend Phil Mickelson, billionaire investor Carl Icahn and Vegas gambling kingpin William “Billy” Walters took part in an insider-trading scheme, federal law-enforcement sources told The Post Friday.

The FBI and the Securities and Exchange Commission suspect that Mickelson and Walters illegally traded on nonpublic information from Icahn about his investments in public companies — specifically his attempted takeover of ­Clorox, the sources said.

The two-year investigation was launched after Icahn made a $10 billion offer for Clorox in July 2011, causing the stock to skyrocket amid a rash of suspicious trading, according to sources with knowledge of the probe.

The feds and Manhattan federal prosecutors are examining Mickelson’s and Walters’ trading patterns to determine whether they profited by trading Clorox as its stock price spiked.

Investigators believe that Icahn, 78, may have passed potentially profitable information to Walters — who is well-known in Las Vegas for his big bets on sports — and that the gambler may have passed some tips along to Mickelson, federal sources told The Post.

Both Mickelson and Walters made similar trades in Clorox stock at about the same time, the sources said.

The investigators also examined phone records for Icahn and Walters, 67, to see whether the two men spoke shortly before the trades.

Icahn is a proponent of charter schools and has helped fund seven charter schools through his philanthropic organization.

All seven charters are named for him.

The Wall Street Journal reports no case may ever be brought against Icahn, Mickelson, or Walters:

There is no indication the government will bring a case in the current investigation, the people briefed on the probe said. Indeed, publicity of the probe could jeopardize the government's ability to put together any potential case, they said, by limiting its ability to covertly gather evidence.

The investigation signals that the FBI and the SEC are concerned about a potential dark side of shareholder activism. Activist investors push for broad changes at companies or try to move stock prices with their arguments. Mr. Icahn, a 78-year-old billionaire, has come to epitomize such activism in U.S. boardrooms.

But the Journal also reports there was much funkiness around the Clorox deal:

The government investigation began three years ago after Mr. Icahn accumulated a 9.1% stake in Clorox Co. CLX +0.16% in February 2011, said the people briefed on the probe. On July 15, 2011, he made a $10.2 billion offer for Clorox that caused the stock to jump.

Well-timed trading around the time of his bid caught the attention of investigators, who began digging into the suspicious trading in Clorox stock, the people familiar with the probe said. 

On Wall Street, rumors had swirled that word leaked out ahead of Mr. Icahn's Clorox bid. Large, highly risky trades had been made in Clorox options four days before his bid. After his $76.50-a-share offer was announced, those options soared in value along with Clorox shares, which closed on July 15 up 8.9% at $74.55.

Investigators have examined trades in Clorox options, the people briefed on the probe said. 

Clorox rejected Mr. Icahn's overture. He launched a proxy battle in August 2011, proposing a slate to replace the company's board with 11 of his nominees. In September 2011, he dropped his proxy battle.

By December 2011, he had sold his entire 12 million shares in the company. Clorox shares, which reached a high in 2011 just after Mr. Icahn's bid, closed at around $66 at the end 2011. A Clorox spokeswoman declined to comment.

I'm sure Icahn will manage to extricate himself from any problems here, but this episode is just another example of some of the corruption that infects these charter school proponents and edu-entrepreneurs.