Business

Ergen ‘forfeited’ his $700M LightSquared stake: attorney

Satellite mogul Charlie Ergen could lose his entire $700 million investment in wireless start-up LightSquared if billionaire investor Phil Falcone gets his way.

A lawyer for the hedge fund billionaire on Monday argued that Ergen, owner of Dish Network, forfeited his rights to the money because he was fully aware that strategic investors were barred from owning the debt.

“This is a breach of contract case,” said David Friedman, Falcone’s lawyer. “A $700 million breach of contract.”

LightSquared and Falcone, whose Harbinger Capital Management is the wireless start-up’s largest stockholder, have sued Ergen for allegedly using $700 million of his own money to buy an $850 million controlling stake in the company’s senior loan.

Ergen’s goal, according to LightSquared: to pave the way for Dish to pick up its spectrum on the cheap.

Dish made a $2.2 billion bid for LightSquared’s assets shortly after Ergen came clean about his LightSquared stake in May.

Dish withdrew its bid — just as the trial over Ergen’s purchases kicked off in January.

Now Ergen’s ability to recoup on the $700 million, which he took from a trust he controls with his wife, lies in the hands of Manhattan Bankruptcy Court Judge Shelley Chapman.

Chapman made it clear at Monday’s hearing that she is wrestling with the question of damages in the heated case.

At one point, she blasted LightSquared for standing silent for months despite rumors that the debt purchases were being made by a strategic investor.

“Nobody called 911,” she said. “If there is a rumor that your house is on fire — you call the fire department!”

The judge also warned Ergen’s side that it shouldn’t expect to get off scot-free.

“There’s got to be a consequence,” the judge said. “You know how you tell children there’s a consequence to doing wrong?”

Still, Ergen’s lawyer, Rachel Strickland, argued that the satellite mogul doesn’t deserve to forfeit one red cent of his $850 million stake, because he had zero to do with the company’s woes.

Strickland said Falcone “welcomed” LightSquared’s bankruptcy — triggered by interference with costly global positioning systems — because it bought him time to try again with regulators.

Strickland also accused Falcone of “manipulating” the restructuring process to preserve Harbinger’s foothold in the company.

“It’s crystal clear that LightSquared has an interference problem,” Strickland told Chapman. “That interference problem is Phil Falcone.”