Hedge fund Harbinger Capital Partners has launched a civil racketeering lawsuit against Charlie Ergen and Dish over what it claims is the latter’s illegal behaviour during LightSquared’s Chapter 11 bankruptcy process.
In its complaint, Harbinger…
Hedge fund Harbinger Capital Partners has launched a civil racketeering lawsuit against Charlie Ergen and Dish over what it claims is the latter’s illegal behaviour during LightSquared’s Chapter 11 bankruptcy process.
In its complaint, Harbinger claims that Ergen, Dish and their affiliates, conducted an “illegal scheme involving mail and wire fraud, bankruptcy fraud, tortious interference, and abuse of process aimed at stripping Harbinger of its valuable contractual rights to control LightSquared and to make critical decisions during LightSquared’s Chapter 11 proceedings- rights that Harbinger acquired pursuant to its multi-billion dollar investment in the company.”
Harbinger argues that the accused used these ‘improper tactics’ to enable them to acquire LightSquared’s valuable wireless spectrum assets at fire-sale prices.
The hedge fund concludes: “By the time the full nature, scope and goal of the defendants came to light, it was too late for Harbinger or for the Bankruptcy Court to prevent the loss of Harbinger’s rights under its stockholders’ agreement with LightSquared.”
To that end, Harbinger is suing Ergen, Dish and Sound Point Capital, the fund which purchased almost US$1bn of LightSquared debt, for violation of the federal Racketeering Influenced and Corrupt Organization Act (RICO) and the Colorado Organized Crime Control Act.
Harbinger is seeking significant damages of at least US$1.5bn.
The case will take place in the Colorado District Court with Reilly Pozner LLP representing the plaintiff.
The suit is the latest legal action brought by one of the parties against the other as they both seek to take control of the satellite-terrestrial venture.
A new bankruptcy deal was unveiled at the beginning of July that would see the wireless venture being majority owned by a group led by JP Morgan and two private equity firms with Harbinger retaining a stake.
Ergen, however, has not agreed to the plan and his lawyers have called for a new trial to judge its fairness.
An earlier plan that proposed repaying Ergen fully in debt was rejected by LightSquared’s bankruptcy court judge earlier this year because it was deemed unfair.
The venture filed for voluntary reorganisation back in May 2012, giving it breathing room from creditors while it seeks a way around GPS interference concerns that are stopping it from launching an LTE network.
