Philip Falcone

Last updated

Philip A. Falcone
Born
Chisholm, Minnesota
Alma mater Harvard University
OccupationCEO of HC2 Holdings [1]
Organization(s) Kidder, Peabody & Co.
Kissinger Institute on China and the United States

Philip A. Falcone is an American businessman and the founder of Harbinger Capital and LightSquared. [2] [3] [4] [5]

Contents

Early life and education

Philip Falcone grew up in Chisholm, Minnesota with nine siblings in a three-bedroom house. [2] [3] [5] He attended Harvard University on financial aid and graduated with a Bachelor of Arts in Economics in 1984. [2] [3] [4]

Growing up in Chisholm, Falcone was a stand-out hockey player. He went on to play Varsity hockey at Harvard. After graduating, Falcone played professionally for the Malmö Redhawks, a Swedish professional hockey team, until his playing career ended after one professional season when he sustained a leg injury. [2] [3] [5] [6]

Career

In 1985, he started his career at Kidder, Peabody & Co. [3] [4] [7] He also worked at Wachovia. [2] [7] He was also Senior High Yield trader at First Union Capital Markets in Charlotte, North Carolina. [7] From 1990 to 1995, he served as president and CEO of AAB Manufacturing Corporation". [7] He was the head of High Yield trading at Gleacher Natwest from 1997 to 1998, and at Barclays Capital from 1998 to 2000. [4] [7]

In 2000, he founded Harbinger Capital with Raymond J. Harbert. [2] [8] In 2008, Falcone became a minority owner of the NHL's Minnesota Wild hockey team when he purchased a 40% stake of the hockey team. [2] [4] [3] Through Harbinger Capital, Falcone and Harbert owned 20% of The New York Times in 2009. [9] That same year, Falcone became its majority owner, though Harbert remained an investor. [8]

He is a founding council member of the Kissinger Institute on China and the United States. [2] [10] He has made further donations to the American Museum of Natural History. [5]

In February 2013, Forbes listed Falcone as one of the 40 Highest-Earning hedge fund managers. [11]

On November 25, 2014, it was announced that Falcone would step down as chief executive and chairman of Harbinger Group effective December 1 to focus on his other venture, HC2 Holdings. [12] [13] [14]

Lightsquared

A significant focus on Phil Falcone's investment activities has been the telecommunications company Lightsquared, which attempted to build a multibillion-dollar satellite-based network that would have supplied 4G wireless broadband in competition with AT&T and Verizon Wireless. [5] The plan, however, consisted of gaining wireless spectrum reserved for satellite uses and employing it for terrestrial communication. Critics described this use of wireless spectrum as a loophole meant to avoid paying royalties to the government. [15] [ better source needed ]

Republican legislators like Chuck Grassley, Ralph Hall and Darrell Issa expressed concerns that Falcone would receive special treatment to develop LightSquared over the United States Military's Global Positioning System. [16] Falcone later denied the claim. [17] On February 15, 2012, the Federal Communications Commission revoked the 2011 conditional approval for further development of the LightSquared network, stating it would interfere with GPS signals. [18]

2012 securities fraud charge

On June 27, 2012, the U.S. Securities and Exchange Commission filed securities fraud charges against Falcone and Harbinger Capital Partners, alleging that Falcone "used fund assets [of $113.2 million] to pay his taxes, conducted an illegal 'short squeeze' to manipulate bond prices, secretly favored certain customers at the expense of others, and that Harbinger unlawfully bought equity securities in a public offering, after having sold short the same security during a restricted period." [19]

The short squeeze was performed by Falcone in relation to a series of high-yield bonds issued by MAAX Holdings. After hearing that a firm was shorting the bonds, Falcone purchased the entire issue of bonds. He also lent the bonds to the short-sellers, and then bought them back when the traders sold them. As a result, his total exposure exceeded the entire issue of the MAAX bonds. Falcone then stopped lending the bonds, so that short-sellers could not liquidate their positions anymore. The price of the bonds rose dramatically. [20] [21] The short-sellers could only liquidate their positions by contacting Falcone directly. [21]

In May 2013, he accepted an SEC settlement in which he and Harbinger agreed to pay a total of $18 million. Under the deal, Falcone would have been banned from operating as an investment advisor for two years. [22] However, in a rare move, the commissioners overruled the enforcement staff and threw out the deal, forcing the two sides back to the bargaining table. Reportedly, SEC chairwoman Mary Jo White felt the deal was too lenient. Finally, on August 19, the SEC and Falcone agreed to a deal in which he and Harbinger admitted breaking the securities laws. It was the first SEC settlement in years in which the defendant was required to admit wrongdoing; usually, defendants who accept SEC settlements do not admit or deny illegal activity. [23]

Under the terms of the deal, Falcone paid a total of $11.5 million of his own money to settle the charges. He disgorged a total of $6.5 million in illicit profits and pay $1.01 million in prejudgment interest and $4 million in civil penalties, and also accepted a five-year ban from the securities industry. By comparison, the May deal required him to pay only $4 million out of his own pocket. Harbinger paid $6.5 million in civil penalties. Falcone admitted to siphoning off $113.2 million of Harbinger assets to pay his personal state and federal taxes and pay customer redemptions to favored clients. He also admitted to manipulating the bond price of MAAX Holdings, a Canadian bathroom products manufacturer, by buying up all of the outstanding bonds and demanding that Goldman Sachs settle all outstanding MAAX transactions and deliver the bonds it owed. Falcone was well aware Goldman couldn't deliver the bonds because all of them were tied up by Harbinger. [23] [24] [25] [26]

On July 4, 2014, the SEC Office of the Whistleblower rejected a claim made by an individual requesting a reward for assisting in the investigation. The SEC rejected the claim, asserting in the "Claimant did not provide information that led to the successful enforcement". [27]

Personal life

Falcone is married with two children, and lives in New York City. [2] In 1997, Falcone married Lisa Velasquez . [28] Lisa was born in 1961 and grew up in Spanish Harlem and has an associate's degree from Pace University. In 1985, she went to Milan Italy to model. In 2008, she started a film production company, Everest Entertainment, and she has produced Mother and Child , 127 Hours , and Win Win . [5] She is active in philanthropic causes, including the American Museum of Natural History and sits on the board of the New York City Ballet. [2] In 2009, the couple reportedly donated $10 million to New York City's High Line project. [29] They have twin daughters, Liliana and Carolina (born February 2005). [30] [31] [32]

In 1999, Falcone built a house in Sag Harbor, New York, which he sold in 2005 for $1.57 million. [33] [34]

In 2008, Falcone bought a house on the Upper East Side, formerly owned by Jeremiah Milbank and later Bob Guccione, for $49 million. [5] Also in 2008, Falcone bought a Saint Barthélemy villa for $39 million. [35] [36]

Falcone's former chef, Brian Villanueva, sued Falcone over an allegedly hostile work environment and alleged racist remarks and they had settled out of court for $60,000. In 2020, Villaneuva filed a new lawsuit claiming to not have been paid the settlement, while Falcone claimed to not have the funds. [37]

Related Research Articles

<span class="mw-page-title-main">Morgan Stanley</span> American financial services company

Morgan Stanley is an American multinational investment bank and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in 41 countries and more than 75,000 employees, the firm's clients include corporations, governments, institutions, and individuals. Morgan Stanley ranked No. 61 in the 2023 Fortune 500 list of the largest United States corporations by total revenue.

<span class="mw-page-title-main">Goldman Sachs</span> American investment bank

The Goldman Sachs Group, Inc. is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered in Lower Manhattan in New York City, with regional headquarters in many international financial centers. Goldman Sachs is the second largest investment bank in the world by revenue and is ranked 55th on the Fortune 500 list of the largest United States corporations by total revenue. It is considered a systemically important financial institution by the Financial Stability Board.

<span class="mw-page-title-main">Steve Cohen (businessman)</span> American billionaire hedge fund manager, sports team owner (born 1956)

Steven A. Cohen is an American hedge fund manager and owner of the New York Mets of Major League Baseball since September 14, 2020, owning roughly 97.2% of the team. He is the founder of hedge fund Point72 Asset Management and S.A.C. Capital Advisors, which closed after pleading guilty to insider trading and other financial crimes.

<span class="mw-page-title-main">Argentine debt restructuring</span> Process following Argentinas Great Depression

The Argentine debt restructuring is a process of debt restructuring by Argentina that began on January 14, 2005, and allowed it to resume payment on 76% of the US$82 billion in sovereign bonds that defaulted in 2001 at the depth of the worst economic crisis in the nation's history. A second debt restructuring in 2010 brought the percentage of bonds under some form of repayment to 93%, though ongoing disputes with holdouts remained. Bondholders who participated in the restructuring settled for repayments of around 30% of face value and deferred payment terms, and began to be paid punctually; the value of their nearly worthless bonds also began to rise. The remaining 7% of bondholders were later repaid 25% less than they were demanding, after centre-right and US-aligned leader Mauricio Macri came to power in 2015.

<span class="mw-page-title-main">TD Ameritrade</span> American online broker

TD Ameritrade is a stockbroker that offers an electronic trading platform for the trade of financial assets including common stocks, preferred stocks, futures contracts, exchange-traded funds, forex, options, mutual funds, fixed income investments, margin lending, and cash management services. The company receives revenue from interest income on margin balances, commissions for order execution, and payment for order flow.

Harbert Management Corporation, based in Birmingham, Alabama, is a U.S. investment management company founded in 1993 by Raymond J. Harbert.

<span class="mw-page-title-main">Greenlight Capital</span> American hedge fund

Greenlight Capital is a hedge fund founded in 1996 by David Einhorn. Greenlight invests primarily in publicly traded North American corporate debt offerings and equities. Greenlight is most notable for its short selling of Lehman stock prior to Lehman Brothers' collapse in 2008 and the $11 million fine they received in January 2012 for insider trading in the UK. Einhorn remains the fund's manager.

Harbinger Capital Partners is a private hedge fund based in New York City, New York, founded by Philip Falcone. Harbinger is a highly diversified multi-strategy hedge fund. Notable investments have included sub-prime mortgages in the United States and the United Kingdom, such as HBOS, and LightSquared, a wireless communications company that filed bankruptcy in 2012.

Magnetar Capital is a hedge fund based in Evanston, Illinois. The firm was founded in 2005 and invests in fixed-income, energy, quantitative, and event-driven strategies. The firm was actively involved in the collateralized debt obligation (CDO) market during the 2006–2007 period. In some articles critical of Magnetar Capital, the firm's arbitrage strategy for CDOs is described as the "Magnetar trade".

<span class="mw-page-title-main">Paulson & Co.</span> American investment management firm

Paulson & Co. Inc. is a family office based in New York City, previously it was a hedge fund established by John Paulson in 1994. It specializing in "global merger, event arbitrage and credit strategies", the firm had a relatively low profile on Wall Street until its hugely successful bet against the subprime mortgage market in 2007. At one time the company had offices in London and Dublin.

Leon G. Cooperman is an American billionaire investor and hedge fund manager. He is the chairman and CEO of Omega Advisors, a New York-based investment advisory firm managing over $3.3 billion in assets under management, the majority consisting of his personal wealth.

<span class="mw-page-title-main">Jordan A. Thomas</span> American attorney, writer, speaker and media commentator

Jordan Andolini Thomas is an American attorney, writer, speaker and media commentator. He is a partner and Chair of the firm SEC Whistleblower Advocates PLLC, where he represents whistleblowers reporting violations of the federal securities laws to the U.S. Securities and Exchange Commission (SEC).

<span class="mw-page-title-main">S.A.C. Capital Advisors</span> Group of hedge funds

SAC Capital Advisors was a group of hedge funds founded by Steven A. Cohen in 1992. The firm employed approximately 800 people in 2010 across its offices located in Stamford, Connecticut and New York City, and various offices. It reportedly lost many of its traders in the wake of various investigations by the Securities and Exchange Commission (SEC). In 2010, the SEC opened an insider trading investigation of SAC and in 2013 several former employees were indicted by the U.S. Department of Justice. In November 2013, the firm itself pleaded guilty to insider trading charges and paid $1.2 billion in penalties. The firm shrank after returning the vast majority of its outside investor capital. Point72 Asset Management was established as a separate family office in 2014. SAC ceased to exist as a separate entity in 2016.

Raymond Jones Harbert is an American business executive, investor and philanthropist from Alabama. He is the founder, chairman and chief executive officer of Harbert Management Corporation (HMC), a global private investment firm with US$7.7 billion of assets under management. He donated US$25 million to Auburn University as part of a US$40 million donation pledge.

<span class="mw-page-title-main">FrontPoint Partners</span> Former American hedge fund

FrontPoint Partners was a hedge fund that became well known for its bet against subprime mortgages during the 2008 financial crisis under Steve Eisman. It was based in Greenwich, Connecticut, with other offices in New York and London.

<span class="mw-page-title-main">Securities market participants (United States)</span>

Securities market participants in the United States include corporations and governments issuing securities, persons and corporations buying and selling a security, the broker-dealers and exchanges which facilitate such trading, banks which safe keep assets, and regulators who monitor the markets' activities. Investors buy and sell through broker-dealers and have their assets retained by either their executing broker-dealer, a custodian bank or a prime broker. These transactions take place in the environment of equity and equity options exchanges, regulated by the U.S. Securities and Exchange Commission (SEC), or derivative exchanges, regulated by the Commodity Futures Trading Commission (CFTC). For transactions involving stocks and bonds, transfer agents assure that the ownership in each transaction is properly assigned to and held on behalf of each investor.

<span class="mw-page-title-main">Goldman Sachs controversies</span>

Goldman Sachs, an investment bank, has been the subject of controversies. The company has been criticized for lack of ethical standards, working with dictatorial regimes, close relationships with the U.S. federal government via a "revolving door" of former employees, and driving up prices of commodities through futures speculation. It has also been criticized by its employees for 100-hour work weeks, high levels of employee dissatisfaction among first-year analysts, abusive treatment by superiors, a lack of mental health resources, and extremely high levels of stress in the workplace leading to physical discomfort.

Joseph F. "Chip" Skowron III is an American former hedge fund co-portfolio manager of FrontPoint Partners LLC's health care funds. He was convicted of insider trading, for which he served five years in prison. He was also required to repay his hedge fund employer $32 million it had paid him in compensation, because he had been a “faithless servant.”

Visium Asset Management LP was an American multi-strategy hedge fund. It began as a healthcare-focused hedge fund, founded in 2005 by Jacob Gottlieb. Visium controlled investment funds with about $8 billion of assets under management and had 170 employees at its peak in 2016. That year, three of the company's traders were indicted by United States federal authorities for securities fraud. One of the accused employees killed himself days after he was indicted. Visium subsequently liquidated several of its funds and wound down operations.

References

  1. ↑ "Our Team – Philip A. Falcone, CEO". HC2 Holdings . Retrieved December 7, 2018.
  2. 1 2 3 4 5 6 7 8 9 10 Forbes, Profile of Philip Falcone as of March 2013. Retrieved September 5, 2013
  3. 1 2 3 4 5 6 Li, Lingbo (June 2, 2009). "Class of 1984: Philip A. Falcone Minnesota Hockey Star Strikes Gold on Wall Street". The Harvard Crimson.
  4. 1 2 3 4 5 NNDB profile
  5. 1 2 3 4 5 6 7 Bethany McLean, 'Falcone Quest', in Vanity Fair, July 2011
  6. ↑ Julia La Roche (June 10, 2014). "25 of the Biggest Hockey Players Working on Wall Street". Business Insider . Archived from the original on September 16, 2014.
  7. 1 2 3 4 5 The Wall Street Journal profile
  8. 1 2 John Helyar, Harbert Outperforming Falcone With 11% Return Suffers Asset Drop, Bloomberg Business, May 16, 2012
  9. ↑ Laurie Bennett, Raymond Harbert, phantom investor in the Times saga Archived July 14, 2015, at the Wayback Machine , Muckety , June 2, 2009
  10. ↑ Philip Falcone Admits His Mistakes, Lisa Maria Falcone Wants an Etiquette Book to Prevent Her Own, in Vanity Fair , June 2, 2011
  11. ↑ Vardi, Nathan (February 26, 2013), "The 40 Highest-Earning Hedge Fund Managers & Traders 2013", Forbes
  12. ↑ Matthew Goldstein (November 25, 2014). "Philip Falcone, Hedge Fund Chief in Exile, Is Stepping Down". The New York Times . Retrieved November 26, 2014.
  13. ↑ Nathan Vardi (November 25, 2014). "Phil Falcone Resigns From Harbinger Group, Collects $40.3 Million". Forbes . Retrieved November 26, 2014.
  14. ↑ Saijel Kishan, Zachary Tracer and Stephanie Ruhle (November 25, 2014). "Falcone Steps Down From Harbinger Group to Focus on HC2". Bloomberg Businessweek . Archived from the original on November 25, 2014. Retrieved November 26, 2014.
  15. ↑ John Hempton, "Lightsquared – some comments," February 2, 2012
  16. ↑ Todd Shields, 'Republicans Want Records of Philip Falcone White House Contacts', in Bloomberg Businessweek , September 21, 2011
  17. ↑ 'LightSquared Founder Philip Falcone Says He's Never Met President Obama, Denies That Network Interferes With Military GPS, Airline Safety', on Fox News , September 19, 2011 "LightSquared Founder Philip Falcone Says He's Never Met President Obama, Denies That Network Interferes with Military GPS, Airline Safety | Fox News Insider". Archived from the original on July 8, 2012. Retrieved November 27, 2011.
  18. ↑ Wyatt, Edward (February 14, 2012). "F.C.C. Bars the Use of Airwaves for a Broadband Plan". The New York Times.
  19. ↑ "Philip A. Falcone and Harbinger Charged with Securities Fraud". Securities and Exchange Commission. June 27, 2012. Retrieved June 27, 2012.
  20. ↑ Henning, Peter J. (June 28, 2012). "In Case Against Philip Falcone, a Warning to Others". New York Times. Retrieved January 29, 2021.
  21. 1 2 Levine, Matt (January 26, 2021). "GameStop Is Just a Game". Bloomberg Opinion. Retrieved January 29, 2021.
  22. ↑ Hedge Fund Manager Philip Falcone Banned as Investment Advisor For Two Years in SEC Deal
  23. 1 2 Stevenson, Alexandra (August 20, 2013). "Falcone to Admit to Wrongdoing as S.E.C. Takes a Harder Line". The New York Times .
  24. ↑ SEC press release announcing Falcone settlement
  25. ↑ Consent decree in 2013 SEC case
  26. ↑ Proposed judgment in 2013 SEC case
  27. ↑ https://www.sec.gov/about/offices/owb/orders/owb-2012-81-final-070414.pdf [ bare URL PDF ]
  28. ↑ "Lisa Falcone: Who You Calling Wife of...?". Bloomberg News. September 16, 2010.
  29. ↑ Robin Pogrebin, Philanthropist With a Sense of Timing Raises Her Profile, The New York Times, June 29, 2009. Retrieved June 27, 2012
  30. ↑ Amy Larocca (November 28, 2005). "Lisa Falcone, writer, with Liliana and Carolina". New York .
  31. ↑ Jessica Pressler and Alice Gregory (December 21, 2010). "10 Under 10: The Power Children of New York". New York .
  32. ↑ Bethany McLean (July 2011). "Falcone Quest". Vanity Fair .
  33. ↑ The Wall Street Journal, House of the Day
  34. ↑ Pope-Chappell, Maya (September 7, 2011). "Soaring Ceilings in Sag Harbor Villa". Wall Street Journal.
  35. ↑ Julia La Roche (July 2, 2012). "Check Out Phil Falcone's Breathtaking St. Barts Estate Mentioned in the SEC Complaint Against Him". Business Insider .
  36. ↑ Nick Summers (March 25, 2013). "Michael Jackson's Lender Helps Hedge Funder Falcone". Bloomberg Businessweek. Archived from the original on March 27, 2013.
  37. ↑ Chris Dolmetsch (June 3, 2020). "Philip Falcone Claims He Can't Pay $60,000 Settlement, Former Chef Says". Financial Post.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.