The Miami Firefighter Relief and Pension Fund has sued Carl Icahn for insider trading in HP shares.

Shareholder activist Carl Icahn is in the dock for alleged insider trading in HP shares. According to the Miami Firefighter Relief and Pension Fund, Icahn knew that Xerox would bid for the HP shares at a higher price later. . Icahn reportedly bought a chunk of HP shares worth $1.2 billion.

Icahn is the largest shareholder of Xerox, holding 11% of its stock. The Pension Fund is a shareholder in Xerox, too.

The bid for HP: Icahn in the driver’s seat at Xerox

The Miami pension fund drew attention to the fact of Icahn’s shareholding in Xerox. It said it allowed him effective control of the company. Icahn had replaced Xerox board members, sold subsidiaries and fired the company CEO, the fund claimed.

Further, the pension fund alleged that “Icahn is party to a confidentiality agreement with Xerox pursuant to which he and his affiliates receive non-public information regarding the company.” Further, Icahn allegedly used this information for his HP trade.

Analyst suspected activist action around HP in October

Gordon Haskett analyst Don Wilson flagged possible activist accumulation in HP after he noticed unusually high volume in the company’s shares in early October. Moreover, the transactions occurred without any obvious catalyst. That led the analyst to, therefore, speculate that HP may buy Xerox at Carl Icahn’s behest.

“HPQ’s fiscal year ends in October and its nomination window opens in December which means if anyone is there, we should be hearing about it in the next month or two,” the analyst wrote.

He was rather prophetic. On November 5, Xerox wrote to HP offering to buy the company for $ 33.5 billion.

The HP stock shot up from $ 18.40 to $ 21.64 on the news.

Carl Icahn: The Miami Firefighter Relief and Pension Fund’s grouse

According to the pension fund, Icahn is in breach of his fiduciary duty by buying HP stock in advance of the move by Xerox to acquire HP.

Further, Icahn is alleged to have violated his agreement of confidentiality with Xerox. In so doing, he enriched himself at the expense of Xerox and its other shareholders.

According to one estimate, Icahn’s also gains from HP’s share appreciation and dividends aggregate $140 million.

“[Icahn was] enriched at Xerox’s expense,” the pension’s lawsuit says. “It is against equity and good conscience to permit [Icahn] to retain any profits made, or dividends received, from investing in HP common stock.”

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