Harbinger Racketeering Suit Attacks Ergen on LightSquaredDawn McCarty
Philip Falcone’s Harbinger Capital Partners LLC opened a new front in its fight with Charles Ergen’s Dish Network Corp. over control of bankrupt wireless broadband company LightSquared Inc.
Harbinger yesterday filed a racketeering lawsuit in Denver federal court against Ergen and his satellite television company, accusing them of using “improper tactics” while trying to obtain LightSquared’s airwaves “at fire-sale prices.”
Falcone, who founded LightSquared, and Ergen have been at odds over the company since it filed for bankruptcy in 2012. LightSquared has accused Ergen, 61, of secretly snapping up its debt to hijack the reorganization and get its airwaves at a discount. At one point, Ergen offered $2.2 billion for the assets, only to withdraw the proposal, citing an undisclosed technical issue.
“Ergen never had any intention to purchase LightSquared’s assets at even the highly distressed price,” Harbinger said in its complaint. “Instead, defendants meant only to displace Harbinger and thereby force a distressed liquidation in which he could obtain the assets at an even greater discount.”
Rachel Strickland, a lawyer for Ergen, didn’t immediately reply to an e-mail requesting comment on the lawsuit. Officials at Englewood, Colorado-based Dish weren’t immediately available for comment.
Harbinger accused Ergen and Dish of violating federal anti-racketeering law and Colorado’s organized crime control act, saying Ergen “wrongfully and deceptively created chaos” in the bankruptcy so Harbinger would lose control of the LightSquared board.
Falcone, 51, and four other directors appointed by Harbinger voluntarily resigned from the board in June.
“Abusing the judicial process to corrupt the legal rights of others is part of Ergen’s modus vivendi,” Harbinger said in the filing, in which it’s seeking more than $1 billion in damages.
LightSquared, based in Reston, Virginia, sought bankruptcy protection after the Federal Communications Commission blocked its service, saying it might interfere with global positioning system navigation equipment. LightSquared still hasn’t obtained FCC approval to use its airwaves.
In May, U.S. Bankruptcy Judge Shelley Chapman in Manhattan threw out a proposed reorganization, saying the plan treated Ergen’s $1 billion debt claim unfairly. The judge also criticized Ergen’s behavior during the case.
After mediation, a tentative agreement was reached that would give majority ownership to JPMorgan Chase & Co., Fortress Investment Group LLC and Cerberus Capital Management LP, a lawyer told the bankruptcy court last week. Falcone’s Harbinger would retain a small stake under the plan.
The case is Harbinger Capital Partners LLC v. Ergen, 14-cv-01907, U.S. District Court, District of Colorado (Denver).