Forum distribution:
Competing demands for CEO's attention (and
cash) |
For
records of the court proceeding reported in the article below, see
-
January 24, 2020 (publicly refiled
March 5, 2020), Supreme Court of the State of New York, Dontzin Nagy &
Fleissig, LLP vs. Philip A. Falcone and Harbinger Capital Partners
Offshore Manager, L.L.C. (Index No. 650535/2020):
Verified Petition
(96 pages,
20 MB,
in PDF format); see also
subsequent
March 4, 2020
Restraining Order
(2 pages,
51 KB,
in PDF format) prohibiting
defendants "from moving, disposing, transferring, encumbering,
and/or further encumbering any property or assets of any type in
either of their possession, custody, control and/or in which either
is, in whole or in part, a beneficial owner"
For
other recent court proceedings addressing similar interests, see
-
February 21, 2020, Supreme Court of the State of New York, Melody
Business Finance, LLC, vs. Philip A. Falcone, et al (Index No.
651155/2020): Summons and Complaint (35 pages,
433 KB,
in PDF format) [for a copy
Complaint with
exhibits, 617 pages 117 MB,
click here];
see also subsequent February
28, 2020 Stipulation and Order
(2 pages,
105 KB,
in PDF format) granting preliminary injunction
prohibiting defendants' removal or disposition of any collateral pledged
to Melody
-
February 12, 2020, Supreme Court of the State of New York, Jet
Aviation Flight Services, Inc., vs. Harbinger Capital Partners, LLC
(Index No. 650974/2020): Verified Petition to Confirm Arbitration Award (6 pages,
637 KB,
in PDF format)
-
October 3,
2019, Supreme Court of the State of New York, The City of New York,
Petitioner-Judgment Creditor, v. HC2 Holdings, Inc.,
Respondent-Garnishee (Index No. 451275/2019):
Order and Judgment (2 pages, 71 KB, in
PDF format); see also
August 7, 2019,
Supreme Court
of the State of New York, The City of New York, Petitioner-Judgment
Creditor, v. HC2 Holdings, Inc., Respondent-Garnishee (Index No.
451275/2019):
Verified Petition for a judgment pursuant to CPLR § 5227 (27 pages, 2.6 MB, in
PDF format)
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Source:
Financial Times, March 9, 2020 article |
Hedge funds
NY judge freezes hedge fund manager
Philip Falcone’s assets
Decision follows failure
to pay millions in legal fees in fight with regulators
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A judge has upheld a
decision by an arbitrator earlier in which Mr Falcone and
Harbinger were ordered to pay $13.6m in legal fees to Dontzin
Nagy & Fleissig © Christopher Goodney/Bloomberg
|
Ortenca
Aliaj
in
London
MARCH 9, 2020
A New York judge has frozen assets
belonging to hedge fund manager Philip Falcone and his Harbinger
Offshore fund after he failed to pay millions in legal fees to a
Manhattan law firm that defended him in high-stakes litigation against
US regulators.
Judge Arthur Engoron ordered the freeze last week following recent
allegations that Mr Falcone, who had an estimated net worth of $1bn in
2014, has reneged on his debts and sold some of the underlying
collateral, which included famous art works by artists such as Pablo
Picasso and Andy Warhol.
In his ruling, Judge Engoron upheld a decision handed down by an
arbitrator earlier this year in which Mr Falcone and Harbinger were
ordered to pay $13.6m in legal fees to Dontzin Nagy & Fleissig for
work going back almost eight years.
The New York-based law firm represented Mr Falcone in a 2013
settlement with the Securities and Exchange Commission over
allegations that the investor had borrowed
$113m from his hedge fund to pay his personal taxes and had secretly
favoured certain clients when it came to redemption requests.
Under the settlement, Mr Falcone and Harbinger admitted to “multiple
acts of misconduct” that hurt investors and interfered with the normal
functioning of the securities markets. The investor and his hedge fund
were ordered to pay $18m in fines.
In a document made public as evidence in court, arbitrator Caroline
Antonacci said DNF had negotiated a settlement with the SEC which was
“highly lucrative” for Mr Falcone as it allowed him “to continue to
oversee his substantial LightSquared investment, remain CEO of a
public company, manage his hedge fund, and immediately resume earning
enormous sums”.
Mr Falcone was surprised at the result, a person familiar with the
situation said.
DNF later also agreed a settlement with the New York attorney-general
on behalf of Harbinger for tax evasion, in which the company was
forced to pay $30m in fines. Harbert Management Corporation, the
Alabama-based investment management company that sponsored Mr
Falcone’s hedge fund, received a $40m fine.
Arbitration documents show that DNF provided legal services to Mr
Falcone and his firm for six years in various capacities. DNF lawyers
negotiated a termination agreement for Mr Falcone’s general counsel,
Robin Roger, who resigned after the investor allegedly failed to pay
her millions of dollars in compensation, and a dispute involving the
investor’s interest in Minnesota Wild, a National Hockey League team.
As lawyers’ bills piled up, Mr Falcone told DNF that he was having
“liquidity” issues and that he was “trying everything under the sun”
to resolve them, according to the arbitration documents.
In a stark reversal of fortune, Mr Falcone has been left nursing heavy
debts and in 2019 sold his New York townhouse for a record $77m.
Mr Falcone, chief executive of HC2, has also found himself in the
crosshairs of activist investor MG Capital. The firm has flagged
concerns over the ex-hedge fund manager’s regulatory issues and is
pushing to oust Mr Falcone from the company’s board.
“We are concerned about the appropriateness and legitimacy of the
services that HC2 may be receiving from Mr Falcone and his affiliates,
especially given past infractions,”
the firm wrote in a letter to shareholders last month.
“Mr Falcone and the incumbent board have taken another series of
brazen steps to entrench themselves at the expense of independent
stockholders and corporate democracy,” it added.
In arbitration, Mr Falcone accused DNF of malpractice and argued that
the firm’s fees were “excessive” and “unreasonable”. Those allegations
were dismissed by the arbitrator.
Harbinger declined to comment.
Copyright The Financial Times Limited 2020.
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