LightSquared investors get SEC warning

December 9, 2011

Executives of the hedge fund that has invested heavily in LightSquared were notified Dec. 8 that they may be investigated for possible civil securities-law violations, said published reports.

The Wall Street Journal reported Dec. 9 that Harbinger Capital Partners, the major financier of LightSquared and its GPS-jamming mobile satellite network, had disclosed that Philip Falcone and two other HCP board members received so-called Wells notices from the Securities and Exchange Commission. The matters under investigation did not relate to LightSquared, the reports said.

Sen. Chuck Grassley (R-Iowa) has long been a critic of what he called the Federal Communications Commission’s fast-track handling of the LightSquared network proposal despite proven threats to aviation navigation, agriculture, and other uses of GPS. On Friday, Dec. 9, a statement sharply critical of the FCC appeared on Grassley’s Senate website.

“Today, documents have been released showing that Mr. Falcone and his hedge fund, Harbinger Capital, received a Wells Notice from the SEC. While this does not mean the SEC definitely will take action against Mr. Falcone and his hedge fund, it does show that the SEC staff believes there is sufficient evidence to consider recommending an enforcement action. Now the FCC is faced with the real possibility that it made a multi-billion-dollar grant of valuable spectrum to someone who could be charged with violating securities laws. I raised this concern seven months ago. Chairman (Julius) Genachowksi was dismissive. Now, more than ever, the FCC chairman should lead the effort to provide documents and offer insight into how the agency decided to give Mr. Falcone, Harbinger Capital and LightSquared this multi-billion-dollar grant,” he said.

A Cornell University Law School online document describes a Wells notice as a letter sent by a securities regulator “to a prospective respondent, notifying him of the substance of charges that the regulator intends to bring against the respondent, and affording the respondent with the opportunity to submit a written statement to the ultimate decision maker.”

AOPA reported in September that Grassley and Rep. Tom Petri (R-Wis.) had raised questions about possible political pressure on the FCC during its review of the LightSquared network application.

On Oct. 5, Grassley pursued the political question further, writing to Falcone and to LightSquared CEO Sanjiv Ahuja to insist that they disclose communications with government officials.

“If Harbinger has nothing to hide and would like to put questions of improper influence at the FCC, Department of Commerce, and White House to rest, the public release of these communications would allow Congress and the American people to fully examine the facts and decide for themselves,” said his letter to Falcone.

The network venture has received $2.9 billion in assets “from Harbinger Capital and associates,” says LightSquared in a section of its website describing its investors. “Harbinger is led by Philip A. Falcone, its chief executive officer, who has over 20 years of investment experience across an array of market cycles,” LightSquared said in the description.

Reports said that in addition to Falcone, Harbinger affiliates Omar Asali and Robin Roger also received Wells notices.

A New York Times report on the Wells notices described the possible investigations as the latest blow for Falcone in a “rough year” that included approval of the LightSquared venture despite “lingering questions” about the impact on GPS. Other bad news for Harbinger this year has been more than $1 billion in investor redemptions of funds, it said.

AOPA has been an outspoken critic of the LightSquared venture since its approval last January as a member of the multi-industry Coalition to Save Our GPS.