Harbinger Capital Partners

As those of you who keep close tabs on the trials and travails of La Familia Falcone know, one of the biggest mistakes Phil made in the last several years was the time he borrowed $113 million from a gated investor fund to cover personal taxes, for which he had failed to set aside enough cash. Falcone learned the hard way that clients don’t take kindly to these sorts of things– even if you pay them back, with interest– and that the Securities and Exchange Commission doesn’t either. Point taken, all that jazz. In retrospect, it might even make sense to Phil re: why people got upset. Having said that, there is no way he, or anyone for that matter, could have predicted anyone would get their panties in a twist over this: Read more »

  • 03 Jan 2014 at 9:37 AM

Bonus Watch ’14: Phil Falcone

Industry ban, shmidunstry ban! Big Phil’s gonna get paid. Read more »

Phil Falcone has apparently found yet another bright side to being banned from the securities industry for 5 years: free time to run errands in the middle of the day. Read more »

Billionaire hedge-fund manager Philip Falcone’s $18 million settlement with U.S. regulators that includes a five-year ban from the securities industry and an admission of wrongdoing was accepted by a federal judge. U.S. District Judge Paul A. Crotty in Manhattan today said in a written order that the agreement reached last month with Falcone and Harbinger Capital Partners LLC is “appropriate and proportionate to the defendants’ admitted wrongful conduct.” [Bloomberg, earlier, earlier]

“I believe putting these issues behind me now is the best course of action for me and our investors,” Falcone said in a statement. The fallen hedgie said the deal will allow him to focus on his publicly traded entity, Harbinger Group, and his wireless venture LightSquared, which is struggling to emerge from bankruptcy. [NYP, earlier]

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 »

Presumably someone is working on a book about the LightSquared saga though so far this is all that I can find on Amazon. But the twists and turns of Phil Falcone’s efforts to build a relatively non-plane-crashing wireless communications network, the dizzying highs and subsequent definitive lows of his relationship with the FCC, LightSquared’s bankruptcy, its ramifications for Falcone’s hedge fund, and the fight to gain control of its spectrum in bankruptcy, are the very definition of excitement in business dealings, which is to say that they’re a bunch of guys sitting in offices and sending emails to each other but, like, angry emails.1

The latest is that Falcone’s hedge fund Harbinger is suing Charles Ergen and Ergen’s EchoStar Corporation and Dish Network for doing naughty things to muck up LightSquared’s bankruptcy process. This is praise from the master; you might recall then-SEC enforcement director Robert Khuzami saying last year that Falcone’s own gated-fund-borrowing-and-short-squeezing shenanigans “read like the final exam in a graduate school course in how to operate a hedge fund unlawfully.” My take at the time was that those shenanigans seemed (1) definitively nasty but (2) not so definitively illegal, and I guess I’ll go with the same answer for Ergen’s manipulations? Man, Fraud Graduate School is easy.

The best thing to do is to assume that everything in Harbinger’s complaint is true, because the story is better that way. If you do, then the story goes: Read more »