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Before Musk, Trump hired another tycoon to cut costs in the United States. It didn’t go well

Umito November 16, 2024

WASHINGTON — Long before Elon Musk took on the mission of demolishing government waste, President-elect Donald Trump had another favorite billionaire, Carl Icahn, whom he tapped in 2017 to streamline government regulations during his first year in office.

It didn’t end well.

Icahn, a notorious corporate raider with an office on Fifth Avenue two blocks from Trump Tower, spent seven months as an unpaid adviser to Trump on regulatory reform. The brutal businessman resigned amid a swirl of ethical questions over changes to a longstanding energy policy that he could have profited from. Icahn has denied any wrongdoing.

His company wrote in an SEC filing that federal prosecutors were investigating the matter in November 2017, but no charges were ever filed.

Icahn has denied any wrongdoing. But critics, including Democratic lawmakers in Congress, cried foul, saying he appeared to benefit personally — and help oil industry cronies — at the expense of taxpayers.

Now Musk, the richest man in the world, took on the role of government reform and, with the billionaire businessman Vivek Ramaswamywill lead Trump’s Department of Government Effectiveness, or DOGE, a nongovernmental agency the president-elect has charged with reducing waste and making Washington work better and faster.

On Thursday, the DOGE account on X (formerly Twitter), called for “small government with very high IQ revolutionaries willing to work 80+ hour weeks for unglamorous cost-cutting. »

Regardless of Musk’s zeal, the ethical pitfalls of his nomination are exponentially greater than those Trump faced with his old friend Icahn, said Richard Painter, the government leader. White House Ethics Lawyer for President George W. Bush, a Republican.

“You have a billionaire who is politically very close to the president of the United States, who has a dominant position in social media, electric vehicles and a private space program, among other things, who is going to be responsible for reducing spending and increasing efficiency in almost every government agency,” Painter told USA TODAY. “It’s obvious that there are very, very broad conflicts of interest here.”

USA TODAY reached out to Musk, Ramaswamy, the Trump campaign — and Icahn — for comment, but none responded.

Providing advice “for carrying out large-scale structural reforms”

Trump said DOGE would “provide advice and guidance from outside the government,” partnering with the White House and the Office of Management and Budget “to drive large-scale structural reform” across the federal government . He said the team’s work would be completed no later than July 4, 2026.

The founder of SpaceX and CEO of Tesla, whose companies have been awarded at least $15.4 billion in federal government contracts over the past decade, said he could cut $2 trillion from the federal budget. At the same time, he publicly stated that he was counting on the Trump administration to help him realize his dream of colonizing Mars.

Musk’s companies, which also include brain implant company Neuralink And boring societyare regulated by numerous federal government agencies that he is now tasked with streamlining. That means Musk would likely recommend changes to agencies that have cost him a lot of fines and penalties.

According to Good Jobs First, a national policy watchdog, Tesla was forced to pay nearly $100 million as part of 73 enforcement actions taken by the Justice Department, the Securities and Exchange Commission, the Agency Environmental Protection, the Ministry of Labor and the Occupational Safety and Health Administration. .

Musk – and Ramaswamy – could also propose policy changes that save them huge amounts of money by cutting red tape and regulations designed to protect consumers and the environment.

Good Jobs First’s tally shows SpaceX was penalized $4.2 million for safety, labor, environmental and aerospace violations.

Musk spends millions to help elect Trump

In the run-up to the November 5 election, Musk befriended Trump and used his wealth, influence and the giant X platform, where he has nearly 205 million followers, to help him defeat Democrat Kamala Harris and win a second term.

In return, Trump called Musk a “rock star” and promised to give him extraordinary latitude in deciding which government programs and regulations to kill.

In doing so, Trump appears to give Musk and Ramaswamy the power to recommend deregulatory measures or budget cuts that could directly benefit their companies. No one knows, except perhaps Trump, Musk and Ramaswamy, given how few details of the deal have been made public.

Icahn’s example

But if Icahn’s case is to be believed, the two billionaires (Ramaswamy is worth estimated at $1 billion of his pharmaceutical company Roivant Sciences) risk coming up against real conflicts of interest.

And given Musk’s vast portfolio, his potential exposure is far greater than Icahn’s.

Like Musk, Trump enjoyed a personal relationship with Icahn before tapping the high-profile billionaire investor to serve as his special adviser before even taking office. A few months earlier, Icahn’s investment firm purchased Trump Entertainment Resorts after the troubled casino operating company emerged from bankruptcy for the fourth time.

“Wall Street expert Carl Icahn will advise President-elect Trump on regulatory reform issues, giving the famous investor a key role in how his own industry is scrutinized. » THE UNITED STATES TODAY reported on December 21, 2016.

Icahn was to advise Trump on regulatory matters as an individual, not as a federal employee — and he would have no special responsibilities, according to a press release from Trump’s transition team at the time.

But it was clear to both Trump and Icahn that his mission – like that of Musk and Ramaswamy – was to significantly gut the rules.

“Under President Obama, America’s business owners have been hamstrung by more than $1 trillion in new regulations and more than 750 billion hours dealing with paperwork,” Icahn said in a statement released by the Trump transition team. let our entrepreneurs do what they do best: create jobs and support communities.

“Ask the fox to guard the henhouse”

From the outset, his role raised significant concerns about conflicts of interest due to his extensive business holdings, particularly in energy-related industries subject to strict federal regulations.

The Democratic National Committee called Icahn’s nomination “a quid pro quo 25 years in the making.”

“It’s a bit like asking the fox to guard the henhouse,” Andrew Stoltmann, a partner at the securities law firm Stoltmann Law, said at the time.

“Disturbing” appearances of conflicts of interest

Icahn’s investment in CVR Energy, an oil refining company, was seen as a potential conflict, particularly when he advocated for changes in biofuel regulations that could benefit the company and to other players in the refining industry.

That led to increased scrutiny from lawmakers.

In May 2017, eight Democratic senators wrote to federal financial and environmental agencies to request a federal investigation into whether the billionaire activist investor influenced the Trump administration to lower the price of renewable fuel credits.

Trump White House sought to distance itself by asserting Icahn’s role was informalas “a citizen whose opinion the president respects and with whom the president speaks from time to time.”

On August 17, 2017, Icahn resigned, just four days before The New Yorker magazine published an explosive 12,000-word article titled “The failure of Carl Icahn’s raid on Washington“Among his claims was that Icahn attempted to leverage his advisory position and relationship with Trump to influence U.S. environmental regulations for his own financial benefit – and that of his industry.

In a letter to Trump, Icahn said that “contrary to the insinuations of a handful of your Democratic critics, I have never had access to non-public information or taken advantage of my position, nor do I believe that my role presented conflicts of interest.

A broad portfolio across many sectors

In the current case, the goals of the new DOGE – so named after the Dogecoin cryptocurrency championed by Musk – focus on scrutinizing federal operations and recommending reforms to reduce waste and improve efficiency .

This could present Musk with a wide range of conflicts of interest given his significant stakes in companies involved in energy, transportation, space exploration, military and intelligence.

It’s worth noting that all eight senators who raised questions about Icahn are still in office. One of them, Sherrod Brown, lost his re-election bid and will leave the Senate in January.

But another, Elizabeth Warren of Massachusetts, has already sparred with Musk.

“The Office of Government Efficiency is off to a good start with divided leadership: two people doing one person’s job. Yes, that seems REALLY effective,” Warren posted on X.

Musk’s response: “Unlike you, none of us get paid, so It’s actually very effective..@DOGE will do great things for the American people. Let history judge. »

Like Painter, Danielle Brian – executive director and president of the Project On Government Oversight – is concerned that DOGE is rife with potential conflicts of interest.

“I think there’s a really good comparison” between the two cases, Brian said Friday.

“The issue in this case was that Carl Icahn seemed to take the public outrage seriously enough to step down,” she added. “I don’t see Musk feeling the same sense of shame that Icahn did eight years ago.”