Remember Phil Falcone? Hedge fund manager about yea high? Cuts his hair like he’s still playing professional hockey? Is betting the farm on a company called LightSquared that “seeks to create connectivity for all” but in doing so might “cost 794 lives in aviation accidents over 10 years with disruptions to satellite-aided navigation” and filed for Chapter 11 bankruptcy last May? Anyway, LightSquared’s creditors were in court today asking for the right to go after Big Phil/Harbinger, who they believe screwed them big time. Read more »
Wilbur Falcone
LightSquared Creditors Seek Permission To Go After Mrs. Phil Falcone’s Shoe Collection
By Bess Levin
It’s no secret that one of our favorite hedge fund wives is Lisa Maria Falcone. Whether she’s imploring bitches to throw their hands in air, hiring little people for her twin daughters’ birthday party, spooning her pet pig, or simply flitting about town in outfits that go from gladiator chic to deconstructed “Like A Virgin,” the woman is her own special brand of fabulous. LMF started keeping a considerably lower profile once her husband Phil’s hedge fund hit a streak of bad luck last year, though we always knew she’d be back. Unfortunately, we’d hoped the woman who does what she wants, haters of the Upper East Side be damned, would return to us with the news her production company was putting the finishing touches on Wilbur Falcone’s debut album or that she was launching a line of evening wear inspired by Merpeople and not this: Read more »
To put it lightly, the last couple years have been a rather dark time for Phil Falcone. Though his woes are too numerous to mention in full, they include: the adversity he’s faced in getting people to believe in LightSquared; his unbelievably pissy investors, who still aren’t over the time he borrowed $113 million from a gated fund to pay personal taxes, or offered to pay out redemptions in illiquid LightSquared equity; the Securities and Exchange Commission, which wants him barred from the industry; the woman who once offered a respite from it all, who now won’t even come out of her room when she knows he’s home; and, of course, the plunging returns in his once highly profitable hedge fund. It would be enough to make a grown man say ‘Fuck, it. I’m done.’ Put a few things in a sack, tie it to the blade of a hockey stick, and hitchhike back to Minnesota. But Phil didn’t do that and now? After a merciless storm of shit that felt like it would never ease up? After long days of investors and regulators breathing down his neck and nights of having to pound on the front door because he was accidentally purposely locked out of the house? The tide feels like it’s turning for Philip Falcone. Read more »
If you knew nothing about Phil Falcone but what you read in the SEC’s assortment of complaints against him today, you would probably conclude that he’s kind of a dick. The loan thing, of course – Falcone borrowed $113mm from Harbinger at the same time he was preventing investors from withdrawing their money – but also a whole range of new and exciting charges announced today. Like that time he got mad at his prime broker and so bought 113% of the issue of a bond that the prime broker was short, and then called in the prime broker’s borrow to screw them (and gloated to them about it). Or the time – sorry, three times – that he shorted stock of companies that were doing equity offerings and then illegally covered his short with his allocation in those offerings.
Robert Khuzami is right about the marvelous variety and inventiveness of Harbinger’s scammy ways, but lots of people do lots of bad things on Wall Street. It’s just that usually their victims are either diffuse markets (insider trading) or widows and orphans (Ponzi schemes etc.) – it’s rare to spend so much time screwing so many big institutions. And it’s maybe even rarer for the SEC to stick up for those institutions.
Start with the thing that’s gotten the most attention so far: the loan that allowed Falcone to take $113mm out of his fund when investors were not allowed to redeem. How did no one tell him that that was a bad idea? Well: Read more »
Securities And Exchange Commission Still Hung Up About The Time Phil Falcone Borrowed Money From A Gated Fund To Pay Personal Taxes
By Bess Levin
Remember the time Harbinger Capital Partners founder Phil Falcone was a little short on cash, and decided to “borrow” $113 million from a fund in which redemptions had been suspended in order to pay personal taxes, which he later begrudgingly apologized for? Unfortunately for Big P, the SEC does. (The regulator also recalls he time he allegedly played favorites with Goldman and allegedly manipulated some markets.) Read more »
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Hedge Funds
Temporary Setbacks Aside, You Haven’t Seen The Last Of LightSquared, Phil Falcone
By Bess Levin
LightSquared Inc. filed for bankruptcy after its plan to deliver high-speed wireless to as many as 260 million people ran afoul of U.S. regulators. LightSquared, based in Reston, Virginia, listed debt and assets of more than $1 billion each in a Chapter 11 filing today in U.S. Bankruptcy Court in Manhattan. The filing came after intense negotiations with creditors, who had requested that the company’s backer, Philip Falcone, step aside. Harbinger Capital Partners, Falcone’s New York-based hedge fund, had invested about $3 billion in LightSquared and owned about 74 percent of it as of Jan. 27. Falcone also had served on LightSquared’s board. Creditors asked for Falcone’s departure when they gave the company a weeklong extension on April 30 to stave off a default and keep trying to renegotiate its debt, according to a person with knowledge of the matter. [Bloomberg]
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Hedge Funds
The Only Thing That Keeps Phil Falcone Up At Night Is Counting All The Money He’s Going To Make Off Of LightSquared
By Bess Levin
From outward appearances, the past couple years have been a stressful time for Phil Falcone. After making billions of dollars for himself and for his investors on subprime, the Harbinger Capital Partners founder provoked the ire of many a client by tying up a good chunk of their money in a wireless start-up called LightSquared (a company the Federal Communications Commission is no fan of, due to the fact that it reportedly interferes with GPS devices used on land, sea, and in outer space), by borrowing $113 million from a gated fund in order to pay personal taxes, and by only allowing certain investors (Goldman Sachs) to get out while freezing redemptions for others and then telling them they could leave if they found some else to pick up their stake. Assets under management at Harbinger have dropped $23 billion, from a peak of $26 billion. For a variety of reasons, the Securities and Exchange commission wants to see him banned from the industry. A worried Bloomberg News reporter recently revealed he has a problem with pit stains (“[his] shirt appeared darker under the arms in his office last month”), which wouldn’t pose an issue were his shirt supply not dwindling rapidly (“One place Falcone is visiting less frequently is Domenico Vacca, the New York boutique where suits retail for $3,900 and shirts $490, according to a person with knowledge of his purchases. He orders every four or five months [now] compared with every two or three months between 2006 and 2009″). Read more »
But Mr. Falcone and the SEC appear divided on two crucial questions, according to people familiar with the matter. The first point yet to be agreed on is the amount of possible financial sanctions, they said. The two sides also must resolve whether as part of the settlement Mr. Falcone would face a temporary ban from working in the securities industry or acting as a director of a public company. The hedge-fund billionaire’s refusal to accept an industry ban, fearing it would essentially end his career, led to the breakdown of settlement talks last year…Harbinger and Mr. Falcone are being probed by the SEC on three fronts. About a year ago, Harbinger disclosed that it was under investigation by the SEC for possible market manipulation. It wasn’t previously reported that the allegation involves a company called MAAX Holdings Inc., now called MAAX Corp., a Canadian maker of bathroom fixtures, according to people familiar with the matter. The SEC also has been looking at whether Harbinger misled investors by failing to disclose in a timely fashion a $113 million loan to Mr. Falcone from the fund’s investors in 2009. Mr. Falcone has now repaid the loan money, which he used to help pay his personal taxes. The third issue the SEC is investigating is whether Harbinger agreed to allow some investors, including Goldman Sachs Group Inc., GS +3.71% to cash out of their holdings while barring other clients from withdrawing their money, or favored Goldman or other investors with information other clients didn’t get during a 2009 restructuring of the firm. [WSJ, earlier]
Back in March, a woman named Anna Gristina was arrested for allegedly running a whorehouse out of an East 78th Street apartment, with plans to go global. In that time, we’ve learned a good bit about Gristina (who goes by Anna Scotland professionally), who currently remains incarcerated on Riker’s Island. For instance, at the time of her arrest, she was meeting with a friend and broker who was supposedly helping her line up financing to expand the venture (which she maintains was an upscale dating site), she paid her hookers well, and she was an animal lover. Emphasis on the past tense because apparently anyone can be an animal lover until push comes to shove and mommy needs money for legal fees. Then it’s good-bye lush accommodations upstate, hello slaughterhouse. Read more »
Wilbur Falcone is a pig who can play the piano and lives with a hedge fund manager of the same name, who was dealt some bad news today. This is her story.
“Never wrestle with a pig. You both get dirty and the pig likes it.” — Unknown
Wilbur glanced down at her watch. 12:13. Usually, she hated when people were late and, under normal circumstances, this would have gone beyond the point of what she’d tolerate. Hell, make her wait more than 5 or 6 minutes and you were ensuring you’d be receiving a series of irate texts inquiring sharply as to “WHERE THE HELL ARE YOU??????!!???” and threatening “If you’re not here in 30 seconds I’m leaving.” But today she was practically willing Tom to continue making her wait under the bodega awning. Just another minute. Just one more minute.
She took a long drag off her cigarette. Almost immediately, Phil popped into her head, as he often did these days. “What are you doing,” he’d say, in a way that told you he was irritated but irritated because he cared. “That shit will kill you.” She’d let him convince her to give it up years back, citing evidence about what it would do to her singing voice, and hadn’t even ever used the emergency stash at the bottom of her vanity, even despite all that had gone down these last 18 months. But now she needed one. Just a few puffs and she could be transported, if only for a moment, from this nightmare. Read more »
Let’s role-play for a second. You’re a well-known hedge fund manager who’s had a really, really shitty 18 months. Your investors hate you, because of petty little stuff like 1) you loaned yourself $113 million from a gated fund to pay personal taxes 2) you tied up a good chunk of their money in a walkie-talkie passion project 3) you will only let them leave if they can find a buyer for said passion project on the black market and you both know that’s not happening any time soon. It appears as though you’re somewhat past due on paying property taxes. The deal you’ve bet pretty much everything on may be fucked. Your singing and dancing pig, the one person you thought you could count on and who, even if you lost everything, would still make you feel like a rich man, has started not just considering her options but unapologetically flaunting them in your face. (You didn’t need Wilbur to have her date– a potential new benefactor and the third this week– pick her up just as you were getting home to see them leave and you really could have dealt without hearing him ask “Who’s that guy?” and hearing her cruelly laugh and answer, “Oh him? He’s nobody”?). So when the SEC, which has been investigating what you’ve been up to, offers you a deal to settle by agreeing to be banned from the securities industry, what do you do? Do you say, “You know what, that actually sounds great,” because honestly, what are you holding onto anymore? This way, you can start fresh. Give the double-finger fuck you to everyone and take off? Maybe that’s what you do if you’re you but in this scenario you’re Phil Falcone and you’re not going anywhere. Throw in the towel, his ass. Read more »
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