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Philip Falcone and Harbinger Admit Misconduct and Agree to pay $18 Million to Settle SEC Enforcement Action

The Securities and Exchange Commission (SEC) announced on August 19 that it agreed to a settlement with hedge fund adviser Philip Falcone and his firm Harbinger Capital Partners (HCP).  Pursuant to the settlement agreement, Falcone and Harbinger will pay more than $18 million.  In addition, Falcone agreed be barred from the securities industry for at least five years and to admit multiple acts of wrongdoing which resulted in harm to investors. 

In the underlying enforcement actions filed in June 2012, the SEC alleged that Falcone orchestrated an improper short squeeze on a Canadian company’s bonds, favored redemption requests for certain large investors in the HCP Fund I while harming other investors, and inappropriately used $113 million in Harbinger Capital Partners Special Situations Fund (SSF) assets to pay his personal taxes.  

“Falcone and Harbinger engaged in serious misconduct that harmed investors, and their admissions leave no doubt that they violated the federal securities laws,” said Andrew Ceresney, Co-Director of the SEC’s Division of Enforcement.    “Falcone must now pay a heavy price for his misconduct by surrendering millions of dollars and being barred from the hedge fund industry.” 

According to the settlement agreement, Falcone will pay $6,507,574 in disgorgement, a $4 million penalty and $1,013,140 in prejudgment interest.  The balance of the $18 million settlement will be paid by Harbinger entities, which are required to pay a $6.5 million penalty.

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Milberg Tadler Phillips Grossman LLP
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