Dish Investors Can’t Exclude Ergen From LightSquared Bid

Charlie Ergen, Dish Network Inc.’s chairman and controlling shareholder, can’t be excluded from the satellite TV company’s bid in LightSquared Inc.’s bankruptcy auction, a Nevada judge ruled in a shareholder lawsuit.

Clark County District Judge Elizabeth Gonzalez in Las Vegas said the shareholders presented “no evidence and no coherent legal theory of irreparable harm” to bar Ergen and other Dish directors the investors claim are beholden to him from participating in the $2.22 billion bid for LightSquared assets.

The Jacksonville Police and Fire Pension Fund sued the Dish board on behalf of the company, arguing an independent committee should oversee the LightSquared bid because Ergen had privately bought about $1 billion of the bankrupt company’s debt. They alleged a previously established independent committee was terminated because it asked about Ergen’s debt purchase.

“Plaintiff has not submitted any credible evidence to support its allegation that Dish’s corporate governance procedures are now or will become in the future relevant to the bankruptcy court’s determination of whether Dish is a good faith bidder,” Gonzalez said in yesterday’s ruling.

LightSquared Spectrum

The judge restricted Ergen’s participation in negotiations about the third-party release that’s part of the proposed plan to sell LightSquared spectrum assets, for which Dish is the stalking-horse bidder at the auction scheduled for Dec. 11. The release, which might affect any LightSquared claims against Ergen for buying its debt, has raised objections from the U.S. Trustee, the arm of the Justice Department that oversees bankruptcies.

“Dish has a significant interest in exploring the possibility of resolving the bankruptcy trustee’s objections by modifying the release and carving out claims against” Ergen and his privately-owned entity that acquired the LightSquared debt, the judge said. “Dish is unable to explore this option so long as Dish’s actions in the LightSquared bankruptcy related to the release provisions are controlled by Ergen.”

Gonzalez said at a Nov. 25 hearing on the shareholders’ request that they might be able to proceed to trial on their breach of loyalty claim and seek damages against Ergen and the directors allegedly under his control.

Ergen ‘Disloyal’

“We believe the evidence plainly shows that Charlie Ergen has been disloyal and his cohorts on the board have preferred his personal interests over those of Dish and its public investors,” Mark Lebovitch, an attorney for the shareholders, said in an e-mailed statement. “We are confident that they will be held accountable.”

LightSquared, based in Reston, Virginia, filed for bankruptcy in May 2012, listing assets of $4.48 billion and debt of $2.29 billion. U.S. regulators blocked the service after makers and users of GPS devices, including the U.S. military and commercial airlines, said LightSquared’s signals would confound navigation equipment.

“The company is pleased that the Nevada court denied in virtually all respects the plaintiff’s request to interfere with the decision-making authority of the company’s board of directors with respect to the potential acquisition of certain assets of LightSquared,” Englewood, Colorado-based Dish said in an e-mailed statement.

U.S. Bankruptcy Judge Shelley Chapman in Manhattan last month dismissed claims by Philip A. Falcone’s Harbinger Capital Partners LLC, LightSquared’s owner, accusing Ergen and Dish of fraudulently trying to take control of LightSquared by secretly buying the company’s debt.

New Complaint

LightSquared filed a new complaint Nov. 15 in bankruptcy court alleging Ergen violated a credit agreement provision barring the company’s direct competitors from owning its debt by his purchases through SP Special Opportunities LLC. Dish said this week in a court filing seeking dismissal that the new complaint suffers from the same defects as the first one.

A hearing in bankruptcy court is scheduled Dec. 10 for a confirmation hearing to approve one of the four competing reorganization plans, one each from LightSquared, Harbinger, a group of secured lenders, and Mast Capital Management LLC.

The Nevada case is In re Dish Network Corp. Derivative Litigation, A-13-686775-B, Clark County, Nevada, District Court (Las Vegas). The bankruptcy case is In re LightSquared Inc., 12-bk-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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