SEC Sues Falcone, Harbinger
By Jean Eagelsha and Juliet Chung
Securities regulators have sued Philip Falcone and Harbinger Capital Partners LLC, accusing the hedge-fund manager and his firm of a raft of violations, including misappropriating client assets, manipulating bond prices and favoring certain customers over others.
The U.S. Securities and Exchange Commission filed civil fraud charges Wednesday against Harbinger, Mr. Falcone and Peter Jenson, the firm’s former chief operating officer, in U.S. District Court.
The SEC said Wednesday in a statement that it would seek “disgorgement of ill-gotten gains, pre-judgment interest and civil money penalties” from Harbinger and Mr. Falcone. The regulator also wants to prohibit Mr. Falcone from serving as an officer or a director of any public company.
The suit comes after settlement talks between the SEC and Mr. Falcone failed to produce a deal, and one of the sticking points had remained the SEC’s insistence that Mr. Falcone serve some form of industry ban, according to people close to the issue.
“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 enforcement division, said in a statement.
Responding to a request for comment on the possibility of an SEC suit, Mr. Falcone said Tuesday that “I plan on vigorously contesting it.”