Billionaire financier Phil Falcone’s attempts to rebuild his troubled empire just took a massive hit from Mary Jo White’s Securities and Exchange Commission.
The tough as nail head of the SEC refused to settle two civil suits against him and his Harbinger Capital Partners hedge fund.
While Harbinger, which disclosed the SEC slap-down in a regulatory filing, did not say why its proposed settlement was turned aside, White did say that she was looking into doing away with deals that allowed defendants out from under probes without admitting or denying guilt.
Falcone’s Harbinger, in the filing, said it was informed late Thursday that the SEC voted down the two settlement agreements that Falcone hashed out with the watchdog’s enforcement staff and appeared to write-off as a done deal.
The disclosure was made Friday by Falcone’s publicly traded entity, Harbinger Group, which isn’t tied to the SEC’s complaints against Falcone or the hedge fund.
In June, White sent a letter to staffers of the enforcement division, instructing them to assess their “ongoing investigations and pending actions” with an eye toward “whether the conducts and circumstances” might require a public admission of guilt.
“We are going to, in certain cases, be seeking admissions going forward,” White told an audience at a conference last month. “Public accountability in particular kinds of cases can be quite important and if we don’t get them, then we litigate them.”
A call to the SEC for comment wasn’t immediately return.
Last June, the SEC sued Falcone for putting his “lavish lifestyle” — including a $39 million estate in St. Bart’s — ahead of the interests of his investors. Among the allegations was that he wrongfully borrowed $113 million from his hedge fund to pay his personal tax bill.
As part of the settlement hashed out earlier this year, Falcone agreed to pay $18 million and be banned from raising new money for his hedge fund, which was already on the brink of collapse.
The fund’s assets have shriveled in recent years to $3 billion, from a whopping $26 billion in 2008.
Harbinger also agreed to “expeditiously satisfy” all pending requests from investors to yank their money, according to a letter to Harbinger’s investors sent out in May. As part of the deal, SEC was going to appoint an “independent monitor” to “ensure the fair and equitable treatment of all investors of the funds.”
Falcone, a hockey player at Harvard, rose to hedge fund stardom betting against toxic subprime mortgages leading up to the housing collapse. His rise to fortune was followed by a string of setbacks, however, including investor anger over Harbinger’s $2.9 billion investment in wireless venture LightSquared, which Falcone is currently trying to save from bankruptcy.