According to a report by Bloomberg, the Securities and Exchange Commission has voted in favor of filing a lawsuit against Philip Falcone, billionaire founder of hedge fund Harbinger Group Inc (NYSE:HRG) for inappropriately using client funds to pay his own taxes, and for giving unduly preferential treatment to Goldman Sachs Group, Inc. (NYSE:GS) to withdraw funds.
The SEC may be charging Falcone that he misled investors by not appropriately disclosing a loan of $113 million he took in 2009 from the fund’s investors and used to pay his personal taxes. Falcone has since repaid the money.
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The SEC may also be booking Falcone for certain favors granted to Goldman Sachs, and other investors, by letting them withdraw funds, while barring other investors from taking out their funds. Reportedly, Goldman Sachs was also favored with privileged information regarding the restructuring of the firm that was not provided to other funds.
Falcone may also be slapped with a market manipulation claim for improper trading in the bonds of a company called MAAX Holdings Inc. Falcone once held almost $170 million of these bonds.
Falcone is likely to contest the lawsuit given that last year he refused to accept a settlement offer from the SEC which would have banned him from the financial markets, thus ending his career.