The Complaint alleges that the defendants breached contractual and fiduciary duties to the limited partners and made false and misleading statements in the course of soliciting investments in the fund and communicating with the limited partners.
The offering memorandum describes an investment strategy starkly different than the one Falcone actually pursued. Instead of following the strategy he had outlined, Falcone used the limited partners’ funds to buy a controlling stake in SkyTerra, later renamed LightSquared. When Harbinger took its controlling stake, LightSquared was an enormously risky company whose very existence depended on receiving an FCC license to build a vast proposed wireless network.
The military, the commercial aviation industry, agricultural manufacturers and others raised vocal objections. Once numerous tests concluded that the proposed network would severely disrupt the GPS satellites so central to military activities, aviation and farming, the FCC announced that it would not give LightSquared permission to move ahead with its planned network.
The limited partners were misled into investing in the fund and holding their positions, and once they learned the truth about the fund’s stake in LightSquared, it was too late to redeem their interests. As a result, they have suffered enormous losses.
The SEC is actively investigating whether Harbinger improperly allowed Goldman Sachs to redeem its investment while requiring the other limited partners to stay in.
Zamansky LLC, 50 Broadway, 32nd Floor, New York, NY, and their co-counsel, Girard Gibbs, LLP of San Francisco, filed the case. The case,Schad v. Harbinger Capital Partners LLC et al., No. 12-civ-1244, was filed in the United States District Court for the Southern District of New York, and has been assigned to U.S. District Judge Alison J. Nathan.
* UPDATE: Harbinger Investors Sue Falcone, Fund Over LightSquared (Wall Street Journal)