Harbinger Capital, Falcone To Pay $18 Mln In Settlement; Falcone Gets 5-year Ban

(RTTNews) - The Securities and Exchange Commission or SEC on Monday announced that New York-based hedge fund adviser Philip Falcone and his advisory firm Harbinger Capital Partners have agreed to a settlement for improperly using money in hedge funds. The settlement requires them to pay more than $18 million and admit wrongdoing. Falcone also agreed to be barred from the securities industry for at least five years.

It was in June 2012 that the SEC filed enforcement actions, alleging that Falcone, who is also Chairman, President, and CEO of Harbinger Group Inc. (HRG), improperly used $113 million in fund assets to pay his personal taxes, secretly favored certain investors, and conducted an improper "short squeeze" in bonds issued by a Canadian manufacturing company.

In its statement, the SEC noted that Falcone and Harbinger, in the settlement papers filed in court, admit to multiple acts of misconduct that harmed investors and interfered with the normal functioning of the securities markets.

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

The settlement calls for Falcone to pay $6.51 million in disgorgement, $1.01 million in prejudgment interest, and a $4 million penalty. The Harbinger entities are required to pay a $6.5 million penalty.

As per the ban, Falcone will be barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. He will have a right to reapply after five years. The bar will allow him to assist with the liquidation of his hedge funds under the supervision of an independent monitor.

SEC noted that the settlement must be approved by the U.S. District Court for the Southern District of New York.

Harbinger Group shares closed Monday's trading at $8.95, up $0.25 or 2.87 percent.