Falcone’s Harbinger Sues U.S. for Blocking LightSquared

Philip Falcone’s Harbinger Capital Partners LLC filed a $2 billion lawsuit against the U.S., two years after the Federal Communications Commission refused to approve the wireless broadband service of his now-bankrupt LightSquared Inc.

The U.S. reneged on a March 2010 commitment under which Harbinger agreed to invest billions of dollars to build a network to government specifications, the New York-based investment firm said in a complaint yesterday in the U.S. Court of Federal Claims in Washington.

LightSquared filed for bankruptcy in 2012 after the FCC declined to approve its service, saying it might interfere with global positioning systems. Harbinger, which controls LightSquared for now, is seeking recovery of its $1.9 billion investment, along with unspecified damages, according to a copy of the complaint provided by a lawyer for Harbinger.

“After months of intensive bilateral negotiations, Harbinger and the United States, acting through the FCC, entered into a mutually beneficial contract to build and operate a nationwide high-speed mobile broadband network,” Harbinger said in the suit.

“By requiring Harbinger to accommodate the GPS industry’s continued unlawful occupation and use of LightSquared’s L-band spectrum,” Harbinger said, “the United States effectively reallocated LightSquared’s spectrum to the GPS industry.”

Dena Iverson, a spokeswoman for the Justice Department, declined to comment. A call to the FCC this weekend wasn’t immediately returned.

Ergen Bid

An auction of the airwaves in Manhattan bankruptcy court last year attracted only one bid, a $2.2 billion offer from Charles Ergen, Dish Network Corp.’s co-founder. Ergen, 61, dropped out at the last minute, citing a technical issue that hasn’t been explained publicly.

LightSquared sued Ergen this month in Denver federal court, accusing him and Dish of using “improper tactics” to try to obtain LightSquared’s airwaves “at fire-sale prices.”

In May, the company went into court-ordered mediation with creditors after U.S. Bankruptcy Judge Shelley Chapman rejected its most recent restructuring plan. That proposal valued Reston, Virginia-based LightSquared at $7.7 billion and would have let it emerge as a standalone company.

One sticking point has been whether the company can treat a $1 billion debt investment by Ergen differently from similar claims. LightSquared said Ergen acquired the debt under false pretenses and should have been barred, as a rival, from owning it. Ergen denied wrongdoing and said the investment was personal.

New Plan

This month, the company announced it had the tentative new terms of a reorganization plan that would give majority ownership of LightSquared to JPMorgan Chase & Co., Fortress Investment Group LLC and Cerberus Capital Management LP. A trial on how Ergen’s debt will be treated under that plan is scheduled for August, and the company is expected to exit court protection by Sept. 30.

Harbinger would wind up with a smaller piece of the reorganized company under the new plan. Falcone, 51, and other Harbinger-appointed directors resigned from the LightSquared board last month.

Harbinger sued makers of GPS gear in August, claiming they concealed facts about their products that ruined its investment.

That lawsuit, filed in Manhattan federal court, names Deere & Co., Garmin International Inc. and Trimble Navigation Ltd. Harbinger said its damages were $1.9 billion.

The GPS companies have asked the court to dismiss the case, calling the claims “wildly implausible.”

FCC Letter

Harbinger outlined its complaints against the FCC in a May 28 letter to the agency. The firm said it spent billions of dollars to acquire LightSquared and finance a plan for a broadband network on the basis of the March 2010 agreement with the commission.

Makers of GPS-reliant equipment had argued that LightSquared improperly planned to send powerful data signals on airwaves reserved mainly for faint emissions from satellites.

LightSquared said technical fixes are available and the GPS makers should have planned to accommodate its use of spectrum near navigation frequencies. It was the industry, not LightSquared, that made improper use of airwaves, the company said.

By blocking LightSquared’s plan, the government “effectively reallocated” the airwaves to the GPS industry, Charles Cooper, a lawyer for Harbinger, wrote in the letter. He urged the agency to take “immediate, positive” action.

The lawsuit is Harbinger Capital Partners LLC v. U.S., U.S. Court of Federal Claims (Washington). The bankruptcy case is In re LightSquared Inc., 12-bk-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The GPS lawsuit is 13-05543, U.S. District Court, Southern District of New York.