Philip A. Falcone is an American businessman and the founder of Harbinger Capital and LightSquared. As of March 2013, he is the 1175th richest person in the world, and the 377th richest in the United States with a net worth of $1.2 billion.
Early life and education
Philip Falcone grew up in Chisholm, Minnesota with nine siblings in a three-bedroom house. He attended Harvard University on financial aid and graduated with a Bachelor of Arts in Economics in 1984.
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 while playing in Sweden.
In 1985, he started his career at Kidder, Peabody & Co. He also worked at Wachovia. He was also Senior High Yield trader at First Union Capital Markets in Charlotte, North Carolina. From 1990 to 1995, he served as President and CEO of AAB Manufacturing Corporation". He was the head of High Yield trading at Gleacher Natwest from 1997 to 1998, and at Barclays Capital from 1998 to 2000.
In 2000, he founded Harbinger Capital with Raymond J. Harbert. 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. Through Harbinger Capital, Falcone and Harbert owned 20% of The New York Times in 2009. That same year, Falcone became its majority owner, though Harbert remained an investor.
He is a founding council member of the Kissinger Institute on China and the United States. He has made further donations to the American Museum of Natural History.
In February 2013, Forbes listed Falcone as one of the 40 Highest-Earning hedge fund managers.
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. 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.
Republican legislators like Chuck Grassley, Ralph Hall and Darrell Issa have expressed concerns that he would receive special treatment to develop LightSquared over the United States Military's Global Positioning System. He later denied the claim. On 15 February 2012, the Federal Communications Commission revoked the 2011 conditional approval for further development of the LightSquared network, stating it would interfere with GPS signals.
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."
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. 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 law. It was the first SEC settlement in years in which the defendant was required to admit wrongdoing; usually, defendants who accept SEC settlements neither admit nor deny that they broke the securities laws.
Under the terms of the deal, Falcone will have to pay a total of $11.5 million of his own money to settle the charges. He will disgorge 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 will pay $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.
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".
Falcone is married with two children, and lives in New York City. In 1997, Falcone married Lisa Velasquez. Lisa grew up in Spanish Harlem and has an associate's degree from Pace University. In 2008, she started a film production company, Everest Entertainment, and she has produced Mother and Child, 127 Hours, and Win Win. She is active in philanthropic causes, including the American Museum of Natural History and sits on the board of the New York City Ballet. In 2009, the couple reportedly donated $10 million to New York City's High Line project. They have twin daughters, Liliana and Carolina (born February 2005), who attend The Brearley School.
In 2008, Falcone bought a house on the Upper East Side, formerly owned by Jeremiah Milbank and later Bob Guccione, for $49 million. Also in 2008, Falcone bought a Saint Barthélemy villa for $39 million.
- Forbes, Profile of Philip Falcone as of March 2013. Accessed 5/9/2013
- Li, Lingbo (June 2, 2009). "Class of 1984: Philip A. Falcone Minnesota Hockey Star Strikes Gold on Wall Street". The Harvard Crimson.
- NNDB profile
- Bethany McLean, 'Falcone Quest', in Vanity Fair, July 2011
- Julia La Roche (June 10, 2014). "25 Of The Biggest Hockey Players Working On Wall Street". Business Insider.
- The Wall Street Journal profile
- John Helyar, Harbert Outperforming Falcone With 11% Return Suffers Asset Drop, Bloomberg Business, May 16, 2012
- Laurie Bennett, Raymond Harbert, phantom investor in the Times saga, Muckety, June 2, 2009
- Philip Falcone Admits His Mistakes, Lisa Maria Falcone Wants an Etiquette Book to Prevent Her Own, in Vanity Fair, June 2, 2011 
- Vardi, Nathan (Feb 26, 2013), "The 40 Highest-Earning Hedge Fund Managers & Traders 2013", Forbes
- Matthew Goldstein (November 25, 2014). "Philip Falcone, Hedge Fund Chief in Exile, Is Stepping Down". The New York Times. Retrieved November 26, 2014.
- Nathan Vardi (November 25, 2014). "Phil Falcone Resigns From Harbinger Group, Collects $40.3 Million". Forbes. Retrieved November 26, 2014.
- Saijel Kishan, Zachary Tracer and Stephanie Ruhle (November 25, 2014). "Falcone Steps Down From Harbinger Group to Focus on HC2". Bloomberg Businessweek. Retrieved November 26, 2014.
- John Hempton, "Lightsquared - some comments," February 2, 2012
- Todd Shields, 'Republicans Want Records of Philip Falcone White House Contacts', in Bloomberg Businessweek, September 21, 2011 
- '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 
- Wyatt, Edward (February 14, 2012). "F.C.C. Bars the Use of Airwaves for a Broadband Plan". The New York Times.
- "Philip A. Falcone and Harbinger Charged with Securities Fraud". Securities and Exchange Commission. June 27, 2012. Retrieved June 27, 2012.
- Hedge Fund Manager Philip Falcone Banned as Investment Advisor For Two Years in SEC Deal
- Stevenson, Alexandra (2013-08-20). "Falcone to Admit to Wrongdoing as S.E.C. Takes a Harder Line". The New York Times.
- SEC press release announcing Falcone settlement
- Consent decree in 2013 SEC case
- Proposed judgment in 2013 SEC case
- "Lisa Falcone: Who You Calling ``Wife of...?". Bloomberg News. September 16, 2010.
- Robin Pogrebin, Philanthropist With a Sense of Timing Raises Her Profile, The New York Times, June 29, 2009. Accessed 6/27/2012
- Amy Larocca (November 28, 2005). "Lisa Falcone, Writer, with Liliana and Carolina". New York.
- Jessica Pressler and Alice Gregory (December 21, 2010). "10 Under 10: The Power Children of New York". New York.
- Bethany McLean (July 2011). "Falcone Quest". Vanity Fair.
- The Wall Street Journal, House of the Day
- Branden Keil, 'The $49m Town House Guccione's E. Side Pad Sold', in The New York Post, March 5, 2008
- Julia La Roche (July 2, 2012). "Check Out Phil Falcone's Breathtaking St. Barts Estate Mentioned In The SEC Complaint Against Him". Business Insider.
- Nick Summers (March 25, 2013). "Michael Jackson’s Lender Helps Hedge Funder Falcone". Bloomberg Businessweek.