Philip Falcone and his Harbinger Capital Partners hedge fund
firm filed a racketeering lawsuit against Dish Network Corp. and
Chairman Charles Ergen in New York over their investment in
LightSquared, less than three months after a Colorado judge
dismissed a similar suit.
In the six-count suit, filed Tuesday with U.S. District Court in
Manhattan, Mr. Falcone and Harbinger again seek $1.5 billion,
saying Mr. Ergen violated the Racketeer Influenced and Corrupt
Organizations Act when he acquired the debt of LightSquared—the
wireless venture controlled by Harbinger—as Dish was making a bid
for the company in bankruptcy court.
While Dish eventually dropped the bid and Mr. Ergen is set to be
paid in full for the debt he acquired, the transactions hurt Mr.
Falcone and Harbinger in their investment in LightSquared, the suit
says.
Harbinger says Mr. Ergen's purchases caused it to lose money and
control of the LightSquared board. Mr. Falcone and other Harbinger
officials resigned from the board as part of negotiations for a
bankruptcy court restructuring.
"Defendants wrongfully and deceptively created chaos in the
chapter 11 cases directed at disabling Harbinger—the only
stakeholder with a large enough interest to act against their
scheme and, as the largest equity holder, the party most interested
in maximizing the estate's value," Harbinger said in the
lawsuit.
A spokesman for Dish and Mr. Ergen declined a request for
comment. The suit demands a jury trial.
Dish had called the Colorado suit Harbinger's "desperate"
attempt to find someone to blame for its $2 billion loss in
LightSquared.
Mr. Falcone, who controls LightSquared's equity, will maintain
at least a 44% stake in the company when it emerges from chapter
11, although he won't have day-to-day say in the wireless spectrum
venture's operations.
Under RICO, originally designed to prosecute organized crime,
parties can seek more damages than is typically allowed. Mr.
Falcone's similar RICO suit against Dish and Mr. Ergen, filed last
July, was dismissed by a Colorado judge in late April, although the
judge said the suit could be refiled elsewhere. In the new suit,
Harbinger emphasizes that the judge didn't weigh in on the
racketeering or tort claims made in the suit.
Litigation surrounding LightSquared has been a hallmark of the
company throughout its bankruptcy case, which began in May 2012.
Last week, a judge effectively dismissed a suit by Dish
shareholders over the company's and Mr. Ergen's LightSquared
investment. Earlier this year, a judge dismissed most of
Harbinger's suit against GPS related companies and industry groups
over their warnings that LightSquared's network could interfere
with GPS, warnings heeded by regulators that eventually led to
LightSquared's network not getting cleared.
LightSquared filed for chapter 11 shortly after federal
regulators heeded those GPS warnings and refused to clear the
network. Mr. Falcone has hoped the company could one day provide
low-cost mobile services to hundreds of millions of U.S.
citizens.
LightSquared isn't able to fully use spectrum, limited pockets
of airwaves that mobile-phone and Internet companies use, that it
owns without support from the Federal Communications
Commission.
When it emerges from chapter 11, which could come later this
year, the company is poised to be controlled by investors including
Fortress Investment Group LLC and Centerbridge Partners.
Write to Joseph Checkler at joseph.checkler@wsj.com
Access Investor Kit for DISH Network Corp.
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