LightSquared: Phil Falcone's Dream Fades

When hedge fund manager Phil Falcone made a fortune with winning bets against subprime mortgages, he wasn’t shy about flaunting his wealth. In 2008, the year his Harbinger Capital Partners peaked at $26 billion in assets, he and his wife Lisa spent $49 million on a 27-room mansion near Central Park once owned by Penthouse publisher Bob Guccione. In 2009, Lisa grabbed a microphone at a charity event and announced a spontaneous $10 million donation to New York’s High Line park.

Another big bet by Falcone has his hedge fund reeling. Harbinger has seen the biggest drop in assets in industry history—$23 billion in losses and client withdrawals—as a result of troubles at its biggest holding, LightSquared, a fledgling broadband company that Falcone hoped to build into a wireless powerhouse. On Valentine’s Day the Federal Communications Commission said it was preparing to withdraw LightSquared’s permission to operate a nationwide network on the radio spectrum it owns, citing interference with global positioning devices used in navigating everything from fighter jets to minivans.