"The Bear Case against Philip Falcone, Harbinger Group Inc, and Spectrum Brands
- Falcone fraudulently obtained $113.2 million from a hedge fund that he advised and misappropriated the proceeds to pay his personal taxes;
- Falcone and Harbinger secretly offered and granted favorable redemption and liquidity rights to certain strategically-important investors in exchange for those investors’ consent to restrict redemption rights of other fund investors, and concealed the arrangement from the fund’s directors and investors;
- Harbinger engaged in illegal trades in connection with the purchase of common stock in three public offerings after having sold the same securities short during a restricted period.
Rather than pledge personal assets for the “IRS tax liability”, Falcone arranged a personal loan from one of his funds. This did not go over well for several reasons, 1) The fund had halted redemptions, 2) The rate of interest was 3% less than what the fund was borrowing at, 3) He failed to disclose the transaction.
Interesting enough, 2 months after the loan was made, Falcone made a personal capital commitment of 10mil to a "non-harbinger fund".
The amounts 113m and 10mil I have seen before, which is why I'm interested in whether this IRS claim is legit. Could that 113.2 mil been used to fund some entity which was going to purchase assets from his fund? Could Falcones personal and separate 10 million commitment to the non-harbinger fund, represent the premium/collateral as part of a swap trade betting against the value of assets held by the entity? I wonder.
During fiscal 2009, 2008, 2007 and 2006, pursuant to the Financial Accounting Standards Board Codification Topic 350: “Intangibles-Goodwill and Other,” formerly the Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” Spectrum conducted its annual impairment testing of goodwill and indefinite-lived intangible assets. As a result of these analyses Spectrum recorded non-cash pretax impairment charges of approximately $34 million, $861 million, $362 million and $433 million in the eleven month period ended August 30, 2009, fiscal 2008, fiscal 2007 and fiscal 2006, respectively. See the “Critical Accounting Policies—Valuation of Assets and Asset Impairment” section of http://www.sec.gov/Archives/edgar/data/1487730/000119312510070095/ds4.htm
Some Bond Holders of this Junk: (How these guys get away selling this stuff to the state is beyond me...Guess when no one goes to jail why not, right?)
Data for July 2011 - State of New Jersey
HARBINGER GROUP INC 11/15 FIXED 10.625 575,301.22
June, 2012 - Vermont State Treasurer
HARBINGER GROUP INC '41146AAB2 $1,000,000
SPECTRUM BRANDS INC '84762LAG0 $1,975,000
GS HIGH YIELD FUND - Goldman Sachs
SPECTRUM BRANDS INC $2,050,000 (6.75%)SPECTRUM BRANDS INC $5,450,000 (9.5%)
SPECTRUM BRANDS INC $13,650,000.00 (9.5% different issue)
Holdings - Prudential Investments
Nuveen Symphony Credit Opportunities Fund
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