LightSquared Seeks to Bar Ergen From Re-Opening Trial
LightSquared Inc., which is seeking to put Charles Ergen’s $1 billion claim last in line behind other creditors, asked a judge not to re-open a trial over his purchases of the company’s debt after the Dish Network (DISH) Corp. chairman brought forward new evidence.
The evidence presented March 18, which purports to show that Jefferies Group LLC was at fault for delayed trades in the debt, shouldn’t force the bankrupt company to “bear the tremendous cost in money, time delay and distraction” of re-opening the trial, LightSquared said in papers filed March 21 in U.S. Bankruptcy Court in Manhattan.
Philip Falcone’s LightSquared sued Ergen over the acquisition of $1 billion in LightSquared debt. In a trial that ended March 17, Ergen was accused of intentionally delaying completion of some debt purchases, leading to “hung trades,” to thwart LightSquared’s ability to negotiate with debtholders and restructure out of court.
LightSquared alleged that Ergen’s debt purchases were improper because he concealed that he was acting on behalf of Englewood, Colorado-based Dish, buying through a newly formed fund, SP Special Opportunities LLC. Competitors were prohibited from owning LightSquared’s debt, and Ergen knew it, LightSquared said.
Lawyers for Ergen on March 18 presented to the judge e-mail exchanges with Jefferies, which was an intermediary on the purchases, according to LightSquared. The e-mails were intended to support a new argument made by Ergen near the end of the trial.
“The improperly withheld documents do not, as counsel asserted, absolve SPSO and Ergen of responsibility for the hung trades,” LightSquared said in the court papers.
Ergen sought to manipulate the bankruptcy case and keep away rival bidders by building up a “blocking position” in the debt, LightSquared claimed in its complaint. As part of Ergen’s scheme, an affiliate made a $2.22 billion bid for LightSquared and then withdrew it in an attempt to get a better deal for the company’s wireless spectrum, LightSquared alleged.
LightSquared seeks to disallow Ergen’s bankruptcy claim as a result of what it says was his improper behavior. A trial is set to continue today before U.S. Bankruptcy Judge Shelley Chapman on whether LightSquared can exit bankruptcy under a plan to put Ergen’s $1 billion claim last in line to be repaid.
Ergen has said that he acted only for himself in buying the debt and made no “false representations.” He characterized the lawsuit as an illicit ploy to help Falcone keep control of LightSquared in bankruptcy and said the case has cost tens of millions of dollars, eating into creditors’ recoveries.
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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