US hedge fund billionaire sued
US regulators sued hedge fund billionaire Philip Falcone for fraud
Wednesday, accusing him of taking $113 million from a fund to pay his
taxes.
The Securities and Exchange Commission (SEC) said Falcone, who raked
in billions betting against packaged mortgage securities ahead of the US
real-estate crash, took clients’ money from funds run by his Harbinger
Capital Partners to pay his personal taxes.
It also said Falcone illegally manipulated bond prices, traded
preferential treatment to investors who backed a controversial board
initiative, and broke restricted period trading rules in three initial
public offerings to make money on short sales.
Also charged, for aiding in the tax misappropriation charge, was
Harbinger’s former chief operating officer, Peter Jenson.
“Today’s charges read like the final exam in a graduate school course
in how to operate a hedge fund unlawfully,” Robert Khuzami, director of
the SEC’s Division of Enforcement, said in a statement.
Falcone, 49, rose to prominence for his investments in credit-default
swaps ahead of the US property crash in 2007, which allowed him to
benefit heavily from the fall in value of sub-prime mortgage securities.
According to news reports, the SEC filed the charges after being
unable to reach a settlement with Falcone in negotiations aimed at
avoiding litigation. Falcone told The Wall Street Journal he planned on
“vigorously contesting” the charges.
The charges came after Falcone’s ambitious national high-speed
wireless broadband venture LightSquared filed for bankruptcy last month,
after the government refused access to the satellite signal spectrum
needed for the business.
The company had raised several billion of dollars in capital and
loans, including from Harbinger’s main investment fund. AFP |