Harbinger Files $1.5B Suit Against Dish, Ergen

Claims Satellite Giant Tried to Wrest LightSquared Network From Hedge Fund
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The battle between Harbinger Capital Partners chief Philip Falcone and Dish Network chairman Charlie Ergen continues to reach new heights, after Falcone sued Ergen, Dish and a handful of Ergen’s personal investment vehicles in a Colorado Court for $1.5 billion, claiming they tried to wrest control of its bankrupt LightSquared wireless high-speed data network by disrupting the reorganization process.

LightSquared had lofty ambitions when it first came on the scene a few years ago. Falcone, who had made billions by betting against the boom in sub-prime mortgages in the earlier part of the 2000s, had pumped billions into the high-speed data service, which had planned to build a hybrid broadband network using satellites and terrestrial lines to reach as many as 260 million people by the end of 2016. But mounting costs and changes in technology threw a wrench in those plans, and LightSquared filed for bankruptcy protection in 2012.

It was after that bankruptcy filing that Harbinger claims Ergen – who had snapped up wireless spectrum form other bankrupt companies at bargain process – tried to do the same with LightSquared.

This isn’t the first time that Harbinger has sued Dish over LightSquared. Last August it filed suit in U.S. District Court for the Southern District of New York, claiming Dish “engaged in a  fraudulent scheme” to take LightSquared away. That case, where Harbinger was seeking $4 billion – was dismissed last year.

Now Harbinger is suing Ergen and Dish under the Racketeering Influenced and Corrupt Organizations (RICO) Act, a tactic usually saved for mobsters. According to the suit, filed in U.S. District Court for the District of Colorado, Harbinger claims that Ergen and Dish used “wire, mail and bankruptcy fraud, abuse of process, tortuous interference with contract and obstruction of justice,” to obtain a majority of LightSquared’s senior secured debt, make low-ball bids for its assets to gain the support of secured creditors who would get paid, and claiming that by rejecting those proposals, Harbinger breached its fiduciary duty.

Those tactics, LightSquared claims, forced the court to install an independent committee to run all aspects of the company.

Dish said it was currently evaluating the suit and had no comment at this time.

In late June, Harbinger announced a $3 billion restructuring plan that would give 74% of the company to JP Morgan Chase, Cerberus Capital Management and Fortress Investment Group, with Harbinger controlling about 12.5%. As part of that plan, Ergen would be paid $$70 million for his holdings and would get a $492 million secured note.

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