Hedge Fund Manager Philip Falcone Consents to $18M Securities Fraud Settlement

Hedge fund billionaire Philip Falcone and his Harbinger Group (HRG) have reached an $18 million securities fraud settlement, an agreement in principle, with the SEC over allegations that he fraudulently took a $113 million loan from one of his funds to cover his taxes, manipulated the market, and gave preference to certain clients, including Goldman Sachs (GS). Falcone, who will personally pay $4 million, is settling the financial fraud case without admitting or denying wrongdoing. Although he can remain has CEO of his group and stay associated with Harbinger Capital Partners, he is barred from raise new money or using his hedge funds to make investments for two years.

The ban, however, doesn’t apply to the nine investment advisers that Falcone runs through the company. (This, some say, is so that Falcone can unwind the hedge fund without hurting investors.) The pending deal is once again raising questions about whether the SEC is doing enough to take action against wrongdoers in the industry.

For instance, Harbinger Group’s business that involves Falcone acting as a private equity investor in different companies is not really impacted by the SEC settlement. Also, the independent monitor selected by the SEC to watch the firm is one who was on a list that Falcone recommended.

The SEC’s commissioners still have to approve this settlement. Apparently an agreement for resolution had stalled until now because Falcone refused to allow the SEC to apply an injunction against fraud. Because the regulator dropped that bid, Falcone not only settled but he is willing to pay more than previously.

If you suspect that your financial losses are a result of securities fraud, contact our institutional investment fraud law firm today and ask for your free case assessment.

Philip Falcone Settles With SEC, Agrees to Two-Year Ban, CNBC, May 9, 2013

Billionaire Hedge Fund Manager Phil Falcone’s Sweet Deal With The SEC, Forbes, May 9, 2013

More Blog Posts:
AIG Wants to Stop Former CEO Greenberg From Naming It as a Defendant in Derivatives Lawsuit Against the US, Stockbroker Fraud Blog, April 13, 2013

Federal Records Act Lawsuit Seeking to Make the SEC Reconstruct About 9,000 Enforcement-Related Documents is Dismissed, Institutional Investor Securities Blog, February 5, 2013