News, Oversight, Regulation

SEC secures $18 million judgment against Philip A. Falcone, Harbinger Capital

140px-US-SecuritiesAndExchangeCommission-Seal.svgPhilip A. Falcone and advisory firm Harbinger Capital Partners agreed on Monday to pay $18 million and admit wrongdoing to settle allegations by the SEC that he and his firm engaged in conduct that harmed investors.

Last June, the SEC said in its enforcement filing that Falcone used $113 million in fund assets to pay personal taxes, and that he favored certain customer redemption requests at the expense of other company investors. Falcone also allegedly conducted an improper “short squeeze” in bonds issued by a Canadian manufacturing company.

“Falcone and Harbinger engaged in serious misconduct that harmed investors, and their admissions leave no doubt that they violated the federal securities laws,” Andrew Ceresney, the 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.”

Falcone and Harbinger admitted to numerous acts of misconduct that ultimately harmed investors and interfered with the normal functioning of securities markets. He will be required to pay approximately $6.5 million in disgorgement, $1 million in prejudgment interest and a $4 million penalty.

Falcone’s Harbinger entities are required to pay a $6.5 million penalty, and Falcone will be barred from association with any broker, dealer, investment adviser, securities dealer, municipal advisor, transfer agent or statistical rating organization, though he does have the right to reapply after five years.

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