Remember, back in 2009, when Phil Falcone’s personal accountants realized that the hedge fund manager owed the government more than $100 million in state and federal taxes? And he decided to come up with the cash by “loaning” himself $113 million from a gated investor fund? It’s one of our favorite Falcone stories and we bring it up today because it’s one of the reasons, among many, that the Harbinger Capital founder just agreed to pay the Securities and Exchange Commission $18 million, admit wrongdoing, and take a five year involuntary break from the securities industry. For those who need a refresh, here’s how the idea for Falcone to help himself to the money came about, courtesy of the SEC:
1. After figuring out Falcone was in the hole for over one hundred mill, Phil’s accountants informed Harbinger’s COO, Peter Jenson, of the problem.
2. Jenson made some calls and let his boss know that “no bank would accept Falcone’s hedge fund interests as collateral.”
3. Jenson suggested that Falcone “proceed with appraisals of Falcone’s two Manhattan townhouses and artwork, and raised the possibility of borrowing against other assets, including Falcone’s interest in a National Hockey League team and an estate on the island of St. Barts.”
4. Falcone said nothing but quietly stewed. Borrow against his interest in the Minnesota Wild? He couldn’t believe Jenson had the balls to even mention it. Especially when all that investor money was just sitting there, practically begging to be used… Read more »