Falcone Doing It Again? Investor Accuses Him Of “Bailing Himself Out”

In June of 2012, the Securities and Exchange Commission alleged that Falcone “used fund assets [of $113.2 million] to pay his taxes, conducted an illegal ‘short squeeze’ to manipulate bond prices, secretly favored certain customers at the expense of others, and that Harbinger unlawfully bought equity securities in a public offering, after having sold short the same security during a restricted period.”

Falcone Doing It Again? Investor Accuses Him Of "Bailing Himself Out"

The settlement

Fast forward to May 2013, when Falcone agreed to a settlement with the SEC that would have seen him pay $18 million while unable to work as an investment adviser for two years. That deal was nixed by SEC chairwoman Mary Jo White who believed it was too lenient and forced both sides back to the table.

What resulted was the ever-so-rare case of the SEC demanding that the defendant admit wrongdoing. Under the terms of the deal, Falcone will have to pay a total of $11.5 million of his own money to settle the charges. He will part with a total of $6.5 million in illicit profits and pay $1.01 million in prejudgment interest and $4 million in civil penalties, and also accepted a five-year ban from the securities industry.

The “severity” of that settlement has, in the opinion of one shareholder, forced him down the same path as the one he was on before the ruling. It’s hard to imagine a billionaire not having $18 million somewhere under the figurative cushions in his couch.

The accusation and lawsuit

Haverhill Retirement System, especially, believes that Falcone has gone back to his cheating ways and has publicly accused him of paying his settlement from Harbinger Capital Fund.

Haverhill filed a lawsuit to get answers. It believes that Falcone desperately added two seats to the board and sold additional shares in Harbinger Group, something that Haverhill equates to  “Falcone effectively used (using) Company assets to bail himself out of a personal financial crisis.” (Again)

By appointing two new directors, Harbinger Group diluted the representation of ordinary shareholders, giving small shareholders “less of a voice,” Haverhill claims in the suit.

Falcone is no stranger to court, he’s simply added a lawsuit against him. Neither Falcone or Harbinger has responded publicly to the suit or the accusations.

via: Dealbook




About the Author

Brendan Byrne
While studying economics, Brendan found himself comfortably falling down the rabbit hole of restaurant work, ultimately opening a consulting business and working as a private wine buyer. On a whim, he moved to China, and in his first week following a triumphant pub quiz victory, he found himself bleeding on the floor based on his arrogance. The same man who put him there offered him a job lecturing for the University of Wales in various sister universities throughout the Middle Kingdom. While primarily lecturing in descriptive and comparative statistics, Brendan simultaneously earned an Msc in Banking and International Finance from the University of Wales-Bangor. He's presently doing something he hates, respecting French people. Well, two, his wife and her mother in the lovely town of Antigua, Guatemala. To contact Brendan or give him an exclusive, please contact him at theflask@gmail.com