Stay Classy: Hedge Fund Manager Spent On Private Jet While Borrowing [Illegally] For Taxes
In early 2009, hedge-fund manager Philip Falcone was living the life of a newly made billionaire. He had started extensive renovations on a $49 million Manhattan mansion once owned by Penthouse publisher Bob Guccione. He traveled on a private jet, employed body guards and funded his wife Lisa’s new career as a film producer. He was also behind an estimated $113 million in personal taxes.
To pay for the shortfall, Falcone didn’t want to use his own assets, the U.S. Securities and Exchange Commission said in a lawsuit against Falcone yesterday. The manager didn’t take a bank loan backed by his hockey team investments, Caribbean vacation home or art collection. Instead, he borrowed cash from one of his Harbinger Capital Partners LLC funds, using his clients’ money without their knowledge, according to the suit.
The regulator alleged he favored some investors, which people familiar with the firm said included Goldman Sachs Group Inc. (GS) (GS), and engaged in market manipulation, according to the lawsuit, which also named Peter Jenson, the hedge fund’s former chief operating officer. If the SEC wins its case, it will seek to ban Falcone from serving as an officer or director of any public company, foiling his ambitions to become the next Warren Buffett.
The “charges read like the final exam in a graduate course in how to operate a hedge fund unlawfully,” Robert Khuzami, the SEC’s enforcement director in Washington, said in a statement. “Clients and market participants alike were victimized.”
