Wednesday, June 27, 2012

Harbinger Capital and Phil Falcone charged with fraud by SEC including stealing money from funds to pay taxes, onetime big player in NY Times stock

6/27/12, "Philip A. Falcone and Harbinger Charged With Securities Fraud - Full Release," Zero Hedge

"Game Over for the once high flying hedge fund manager....

From the SEC

The Securities and Exchange Commission today filed fraud charges against New York-based hedge fund adviser Philip A. Falcone and his advisory firm, Harbinger Capital Partners LLC for illicit conduct that included misappropriation of client assets, market manipulation, and betraying clients. The SEC also charged Peter A. Jenson, Harbinger’s former Chief Operating Officer, for aiding and abetting the misappropriation scheme. Additionally, the SEC reached a settlement with Harbinger for unlawful trading....

The SEC alleges that Falcone used fund assets 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.

Today’s charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Clients and market participants alike were victimized as Falcone unscrupulously used fund assets to pay his personal taxes, manipulated the market for certain bonds, favored some clients at the expense of others, and violated trading rules intended to prohibit manipulative short sales.”

The SEC filed actions in U.S. District Court for the Southern District of New York against Falcone, Jenson, and Harbinger, and, in connection with the illegal trading scheme, separately instituted and settled administrative and cease-and-desist proceedings against Harbinger.

In particular, the SEC alleges that:

  • Falcone fraudulently obtained $113.2 million from a hedge fund that he advised and misappropriated the proceeds to pay his personal taxes;
  • Falcone and two Harbinger investment managers through which Falcone operated manipulated the price and availability of a series of distressed high-yield bonds by engaging in an illegal “short squeeze;”
  • Falcone and Harbinger secretly offered and granted favorable redemption and liquidity rights to certain strategically-important investors in exchange for those investors’ consent to restrict redemption rights of other fund investors, and concealed the arrangement from the fund’s directors and investors; and
  • Harbinger engaged in illegal trades in connection with the purchase of common stock in three public offerings after having sold the same securities short during a restricted period....

In addition to raiding a fund for personal benefit and cutting secret deals with favored investors, Falcone then lied to investors about what he had done,” said Bruce Karpati, Chief of the Asset Management Unit in the SEC’s Division of Enforcement."...


Harbinger's 2009 $50 million payment to Goldman Sachs questioned:

12/9/11, "S.E.C. Looks at Harbinger’s Dealings With Goldman," NY Times, Deal Book, Roose

"The S.E.C has been investigating whether Harbinger agreed in 2009 to allow Goldman to withdraw up to $50 million from the firm, while not striking similar deals with other clients."...


10/22/10, "Harbinger Capital Sells More NYT Shares,", T. McCabe

"Major New York Times (NYT_) stockholder Harbinger Capital Partners (HRG_) sold 2.9 million shares after the company reported a $4.3 million loss in the third quarter.

According to a Thursday regulatory filing, the sale brings Harbinger's stake in the New York Times down to 7.4%. Harbinger has steadily divested shares throughout the year. In April Harbinger disclosed it had a 9.4% stake, which was down from its 12.8% stake at the beginning of 2010.

The New York Times' revenue declined 2.7% to $554.3 million from $569.5 million during the quarter as total advertising revenues fell 1.0% and circulation was down 4.8% in the third quarter.

New York Times shares are down more than 38% over the past year and are trading around $7.70."


11/24/10, "Harbinger Capital cuts stake in New York Times," MarketWatch

"Harbinger Capital, a hedge fund firm run by Philip Falcone, cut its stake in New York Times Co. (US:nyt), according to a regulatory filing Wednesday. Harbinger reduced its stake in the newspaper company to 2.58%. A regulatory filing in October disclosed Harbinger's stake in New York Times at 7.41%."


Harbinger Capital was among 'liquidity providers' of the now defunct Chicago Climate Exchange:

12/18/2009, "Chicago Climate Exchange"

"World’s first environmental derivatives exchange

The Chicago Climate Exchange is the world’s first environmental derivatives exchange.1

The exchange is owned by the London-based Climate Exchange PLC which also owns the European Climate Exchange, Montréal Climate Exchange, and the Tianjin Climate Exchange. Approximately 10% of CCX is owned by Goldman Sachs and another 10% is owned by Generation Investment Management LLP.2...

Liquidity Providers...

Harbinger Capital Partners"...


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