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SEC Rejects $18M Settlement With Falcone, Harbinger Capital

By Mani
Updated on

The Securities Exchange Commission (SEC) voted not to approve the agreement with Philip Falcone’s Harbinger Capital Partners.

SEC Rejects $18M Settlement With Falcone, Harbinger Capital

The regulator informed Harbinger Capital of its decision yesterday, according to a filing from Harbinger Group Inc (NYSE:HRG).

The SEC’s rejection relates to the proposed $18 million settlement with Philip Falcone’s Harbinger Capital Partners LLC of claims that Philip Falcone borrowed money from his fund.

Rejection of in principle deal

Earlier it was reported that Harbinger CEO Philip Falcone has reached a settlement with the SEC that will see him banned from most work in the financial industry for two years. However, it was indicated that the in principle deal would be subject to final approval by the SEC before it becomes binding.

Last year, the SEC accused Philip Falcone of manipulating the market, with his hedge fund Harbinger Capital Partners, using assets from the fund to pay his personal taxes, and favoring certain customers of his fund ahead of others. According to the earlier statement, the SEC has also reached a settlement with Harbinger Capital Partners.

Possible implication of SEC’s approval

Had the agreement been approved, it would have facilitated Falcone to remain chief executive officer of Harbinger Group Inc (NYSE:HRG). His Harbinger Capital hedge fund would have paid about $18 million in disgorgement, interest and penalties to resolve the SEC claims. However, yesterday the SEC communicated its decision not to approve the agreement.

Falcone bet against subprime

Philip Falcone first made headlines from his investments against the subprime space. In 2009, Falcone decided to transition away from the hedge fund model, and so he bought Zapata and turned it into a holding company focused on acquiring undervalued assets and maximizing cash flow.

However, Philip Falcone only ended tying up much of much of clients’ money in a wireless phone company, LightSquared Inc. that last year filed for bankruptcy.

Earlier, DISH Network Corp. (NASDAQ:DISH)’s Charlie Ergen made a $2 billion bid for bankrupt wireless provider LightSquared that could put Ergen against LightSquared Financier Philip Falcone. However, Falcone was reportedly mulling a reorganization plan that would seek to compensate all creditors except for Ergen.

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