Ergen Calls LightSquared Suit Illicit Bid to Help Falcone
Dish Network Corp. (DISH) Chairman Charles Ergen called LightSquared Inc.’s lawsuit against him an illicit and expensive ploy to help equity holder Philip Falcone keep control of the wireless broadband company during bankruptcy.
LightSquared sued Ergen over how his SP Special Opportunities LLC fund bought up $1 billion of LightSquared’s debt before making a $2.22 billion cash bid for the company and later dropping the offer. LightSquared’s bankruptcy reorganization plan would pay off Ergen’s $1.06 billion claim after those of other stakeholders, including Falcone.
Ergen, citing e-mails sent by Falcone, said today in a filing in U.S. Bankruptcy Court in Manhattan that the lawsuit is “patently illicit” and has cost tens of millions of dollars, eating into the creditors’ potential recovery. Closing arguments in the lawsuit are to be held before U.S. Bankruptcy Judge Shelley Chapman on March 17.
E-mails Falcone sent a few weeks ago to Fortress Investment Group LLC managing director Andrew McKnight “reveal the true, and improper, purpose behind this lawsuit: it is a vehicle to protect Mr. Falcone’s equity and has nothing to do with actual claims against SPSO or Mr. Ergen,” lawyers for Ergen wrote.
The content of the e-mail was blacked out in court papers. Eric Andrus of RLM Finsbury, a spokesman for Falcone, declined to comment on Ergen’s filing.
LightSquared has said Ergen was acting on behalf of Englewood, Colorado-based Dish, a satellite TV company, and tried to conceal his involvement through SPSO because competitors were prohibited from owning debt in LightSquared, which offers satellite services.
Under a Chapter 11 exit plan up for court approval on March 19, LightSquared proposes to place Ergen’s $1.06 billion in debt last in line to be repaid. Ergen has objected.
LightSquared has further argued that Ergen sought to manipulate the outcome of the bankruptcy through the “blocking position” he built up, trying to use it to buy LightSquared’s assets on the cheap and keep away other bidders.
He then withdrew his $2.22 billion offer for the company in the hopes that he could get an even better deal for the wireless spectrum, LightSquared alleged.
Ergen has said he was acting personally, not for Dish, in buying the debt and made no “false representations” about his investment.
LightSquared, based in Reston, Virginia, sought court protection after the Federal Communications Commission blocked the company’s wireless service, saying it might interfere with civilian and military global-positioning-system navigation equipment. The company listed assets of $4.48 billion and debt of $2.29 billion.
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