Hedge fund star Falcone to settle SEC case
Star hedge fund manager Philip Falcone is poised to settle charges that he tapped fund assets to pay his taxes, by accepting an $18 million fine and a two-year ban from investment advisory, according to a filing Thursday.
Falcone, who raked in billions in 2007 betting against packaged mortgage securities ahead of the US real-estate crash, disclosed in the filing an "agreement in principle" with the Securities Exchange Commission to settle the case.
In June 2012 the SEC sued Falcone and his hedge fund management firm Harbinger Capital Partners for fraud, accusing him of taking $113 million from clients' funds to pay his personal taxes.
It also alleged he gave preferential treatment to investors who supported a controversial Falcone-backed board initiative on one Harbinger fund.
In the proposed settlement, which remains subject to SEC and court approval, Falcone will pay $18 million in civil penalties without admitting or denying guilt.
Though allowed to remain chairman and chief executive of Harbinger, he will also accept a two-year ban from acting as an investment advisor or raising any fresh capital.
Falcone, 50, rose to prominence for his investments in credit-default swaps ahead of the US property crash in 2007, which allowed him to benefit heavily from the fall in value of subprime mortgage securities.
But his star fell as a hedge fund manager after the failure last year of the ambitious national high-speed wireless broadband venture LightSquared which his funds had supported heavily.
Even so, Forbes magazine in March estimated Falcone's net worth at $1.2 billion, helped by a doubling over the past year of the share value of his Harbinger Group.
The shares were down 0.9 percent to $9.25 in morning trade Thursday.