A Harbinger Group investor has accused founder Phillip Falcone of wasting corporate assets to bring his wireless venture LightSquared out of bankruptcy.
Bloomberg reported that Harbinger shareholder Haverhill Retirement System filed a lawsuit on Wednesday, claiming that Falcone added two board seats to help secure more than $400 million from Leucadia National Corp. Leucadia agreed last week to buy 23 million preferred securities from Harbinger for $253 million; Harbinger also sold Leucadia $158 million of its shares last year to raise cash in order to meet redemption requests following allegations from the Securities and Exchange Commission in 2012.
The regulator accused Falcone in June 2012 of taking a loan from Harbinger for personal use, giving preferential treatment to certain investors, and manipulating the market price of certain bonds and stocks. He settled with the SEC by allowing to be barred from the securities industry.
LightSquared's bankruptcy was prompted by Federal Communications Commission rejection of the firm to build a wireless 4G network on the grounds that it will interfere with the nation’s global positioning system. The rejection prompted investors of Harbinger, which invested $3 billion in the project, to sue the firm for the money they lost as a result of Falcone's LightSquared stake.
Haverhill also claimed that Falcone and other Harbinger directors violated legal duties to minority investors.