Let’s say you’re a hedge fund manager, and the Securities and Exchange Commission comes calling with allegations that you fraudulently withdrew $113.2 million in client funds to pay your personal taxes; that worse, you ignored an adviser’s suggestion that you borrow against your St. Bart’s estate or National Hockey League franchise to keep the tax man at bay; went opinion-shopping for a law firm that would okay the loan from client assets; and appropriated the cash from a fund from which your investors were prohibited from redeeming assets. That type of situation might be cause for concern, though frankly, if you were the kind of smooth operator who dreamed up the idea of loaning yourself $113.2 million in the first place, you probably wouldn’t be a worrying type. More likely, you’d do what Harbinger Capital founder Phil Falcone did, and tell New York’s Daily Intel that the SEC complaint was a “piece of cake.” (“It’s not like I’m having a heart transplant,” he said.)
And then you’d go about your business and blame the underlings and attorneys who may or may not have tried to keep you out of the sort of mess you now found yourself in. According to The Wall Street Journal:
Mr. Falcone plans to try deflecting blame to a former Harbinger operating chief and two lawyers who advised him to borrow $113.2 million in 2009 from a Harbinger fund to pay his personal taxes even though other investors were blocked from withdrawing money, according to people familiar with his defense.
The SEC’s complaint, meanwhile, is pretty explicit that Mr. Falcone ignored advice against the $113.2 million loan, and a lawyer for Peter Jenson, the former Harbinger chief operating officer, told The Journal that his client’s warning went unheeded. Which, so maybe that’s why Mr. Falcone is taking the whole thing in stride? It’s all really just a difference of opinion…
