NEW YORK Hedge fund manager Philip Falcone on Friday asked a federal judge to dismiss U.S. Securities and Exchange Commission charges accusing him of market manipulation, giving preferential treatment to certain investors and borrowing cash from his own fund to pay his personal taxes.
The billionaire, who was sued in U.S. District Court in Manhattan in June, said government regulators had no evidence that he had deceived investors or acted outside of the law.
The SEC charged Falcone and his fund, Harbinger Capital Partners, with manipulating the bond prices of bathroom fixtures maker MAAX Holdings Inc between 2006 and 2008.
But Falcone said his actions were motivated by sound investment strategy, not by any attempt to deceive investors.
"Plaintiff believes that perfectly lawful market conduct…can be transformed into illegal market manipulation merely by alleging that defendants had manipulative intent," lawyers for Harbinger wrote in a motion to dismiss the case filed on Friday with U.S. District Judge Paul Crotty.
In addition, the government asserted that at the height of the financial crisis, when many of the fund's assets were tied up in the collapse of Lehman Brothers, Falcone let select investors get out while denying that opportunity to others. The SEC also claimed Falcone illegally loaned himself $113 million from the fund to pay his taxes, leaving investors unable to access their own money.
In Friday's court filing, Falcone said governing documents explicitly allowed him to give certain investors preferential liquidity. He also claimed the loan was approved by his outside counsel.
An SEC spokesman declined to comment on the filing.
The SEC's action came one month after LightSquared, a wireless communications company that had over time become Harbinger's biggest investment, filed for bankruptcy, raising questions about Falcone's future in the $2 trillion hedge fund industry.
The cases are Securities and Exchange Commission v. Harbinger Capital Partners LLC et al., No. 12-5028, and Securities and Exchange Commission v. Philip A. Falcone et al., No. 12-5027, both in U.S. District Court, Southern District of New York.
(Reporting by Joseph Ax; editing by Carol Bishopric)