The legacy of one-time high-flying hedge fund manager Phil Falcone may be fading with his highly concentrated and failed investment in Lightsquared, but Falcone is now banking on a lawsuit against the government to bailout his bold and controversial trade.

Falcone

Falcone suing federal government for alleged breach of contract with Lightsquared

Falcone’s hedge fund, Harbinger Capital Partners, is suing the federal government for alleged breach of contract with Lightsquared, alleged breach of good faith and for what Harbinger claims is the “unconstitutional” taking of private property without just compensation by the government.

Lightsquared apparently doesn’t have the same passion for the lawsuit, as it is not party to the action.

“Harbinger has lost most of its approximately $1.9 billion investment, despite having made that investment in specific reliance on the government’s agreement to permit it to build, deploy, and operate a nationwide broadband network using LightSquared’s spectrum,” Harbinger said in court documents.

Falcone’s charges against federal government

In court documents filed Friday with the U.S. Court of Federal Claims in Washington, Harbinger charges that global positioning systems companies “unlawfully” used spectrum owned by the Harbinger-backed LightSquared, the Wall Street Journal is reporting. The GPS companies and advocacy groups claim that LightSquared’s network could interfere broadly with GPS, charges not made when Falcone initially made his investment.

The Federal Communications Commission’s decided in 2012 to halt LightSquared from spreading its network.  This resulted in a breach of the regulator’s agreement to allow Harbinger to buy LightSquared, the firm said in the suit. Without FCC backing, LightSquared has been unable to fully use the spectrum of airwaves it owns that mobile-phone and Internet companies are using.

Falcone’s LightSquared files for bankruptsy

LightSquared filed for Chapter 11 bankruptcy months after the FCC’s ruling, which it blamed on the government’s actions.

“As a consequence of the United States’ breach, Harbinger has been severely injured, for which it is entitled to money damages and interest in such an amount as the proof at trial may warrant,” Harbinger said in court documents.

LightSquared is pursuing a $3.05 billion restructuring plan that would hand 74% of the wireless venture to Cerberus Capital Management LP, Fortress Investment Group LLC (NYSE:FIG) and JPMorgan Chase & Co. (NYSE:JPM), resigning Harbinger to own only 12.5% stake in the company, the article notes. Falcone and other Harbinger-backed directors recently resigned from the LightSquared board.