Hedge-fund billionaire Phil Falcone, sued by Securities and Exchange Commission (SEC) over claims he improperly used client money to pay taxes, has agreed to a two-year ban from serving as a as an investment adviser.
Under the proposed settlement, Falcone’s hedge-fund firm Harbinger Capital Partners LLC would pay about $18 million in disgorgement, interest and penalties to resolve SEC claims that he improperly borrowed money from his fund to pay his taxes, according to a public filing.
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However, terms of the deal allow Falcone to continue serving as the head of the company. But the agreement limits the company’s ability to buy broker-dealers and investment advisers, as well as Falcone’s ability to perform management functions at the firm’s subsidiary advisers.
The regulator accused Falcone of putting his own interests ahead of those of Harbinger investors. The agency also accused Falcone and Harbinger of misleading investors and an outside law firm when Falcone took out a $113.2 million loan in 2009 from a Harbinger fund to pay his personal taxes, even as other investors in the fund were prevented from pulling their money.
The SEC alleged Falcone and Harbinger favored some large investors in return for their supporting a restructuring plan that would limit other investors’ ability to pull out their money, and accused Falcone and two investment managers he controls of manipulating the bond prices of MAAX Holdings,now called MAAX Corp., a maker of bathroom fixtures.
The SEC also charged Harbinger’s former chief investment officer, Peter Jenson, for "aiding and abetting" the misappropriation of fund assets.
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By GlobalDataThe settlement would end a 12-year career as hedge-fund manager for Falcone, who made billions for investors and himself by betting against subprime mortgages in 2006.
