Exclusive: Harbinger's Falcone has a beef with the media

Hedge fund manager Philip Falcone, senior managing director of Harbinger Capital Partners, testifies before a US House Oversight and Government Reform Committee hearing on the regulation of hedge funds, on Capitol Hill in Washington, November 13, 2008.

NEW YORK/BOSTON (Reuters) - Hedge fund manager Philip Falcone is not happy with the news media -- especially some of the recent coverage of his $9 billion Harbinger Capital Partners.

In a roughly 45-minute investor call on Wednesday, Falcone was critical of news stories that have characterized the New York hedge fund's nearly $3 billion investment in an upstart mobile broadband company as a risky gamble, said three people who listened to the morning investor call.

Falcone also expressed dismay that some investors had been talking to reporters and he urged his wealthy clients to stop doing so.

"He started off by talking about the press, saying they don't have the facts straight and that he was upset with investors for leaking info," said a person who listened on the call.

This person added that the 48-year-old billionaire hedge fund manager sounded defensive at times and fielded no questions from investors.

The investor call comes as some of Falcone's wealthy investors are getting anxious over the poor performance of several of his four main funds. His flagship Harbinger Capital Partners fund is down about 13 percent for the year. A $2 billion fund holding hard-to-sell assets is down more than 18 percent this year.

Friday is the deadline for investors in the flagship fund to submit a notice to redeem all or some of their money. One investor who listened to the call said he thought Falcone's intent was "to be reassuring to investors."

Falcone told investors he was disappointed it has taken longer than he anticipated to give back money in the fund holding hard-to-sell assets. But people who listened to the call said Falcone said he expected that to change soon.

Some investors also are uneasy with Harbinger's ownership of an upstart high-speed Internet company called LightSquared, which plans to use satellites and array of land-based cell towers to bring broadband service to every corner of the United States.

Harbinger's two largest investment funds have sunk nearly 40 percent of their assets into LightSquared. And even with that big equity commitment, industry analysts say LightSquared may need to raise an additional $5 billion to build out the so-called 4G telecom network.

Falcone, in an email exchange with Reuters prior to the investor call, said he will likely have another investor call in the next few weeks to specifically discuss LightSquared and the hedge fund's telecom strategy.

In November, LightSquared hopes to launch the first of two satellites that are critical to the success of its network. Investment bank UBS (UBS.N) is in the process of putting together a $750 million loan package for LightSquared to pay-off some of its existing debt and pay expenses, said people familiar with the deal.

Falcone, who made billions for his investors in 2007 by betting against the subprime mortgage market, said in his email exchange with Reuters that his funds began to turn a corner in September. He wants his investors to have a bit more patience.

"The good news," he said in the email, "we actually are making money this month. Yes, we are turning it around."

Falcone declined to talk specifics. But he may be alluding to Harbinger's Credit Distressed Blue Line fund, which has about $1 billion in assets and is said to be posting positive returns this year, according to people familiar with the fund. Even his flagship fund, despite being one of the hedge fund industry's worst performers, is up nearly 3 percent in September.

Still, some investors are beginning to walk away.

The New York State Common Retirement Fund, as first reported by Bloomberg Markets, is pulling its $68 million investment from Harbinger.

The state pension fund recently submitted a request to Falcone to redeem $41 million from Harbinger. Pension fund spokesman Dennis Tompkins said a request to redeem an initial $27 million was submitted to Falcone in January.

Harbinger requires investors in the flagship fund to give 90 days' notice before redeeming their money. Falcone has been returning about 25 percent of an investor's money in the fund each quarter -- meaning it can take up to a year for investors to fully exit Harbinger.

(Reported by Matthew Goldstein and Svea Herbst-Bayliss, editing by Matthew Lewis)