NEW YORK (Reuters) - Hedge fund Harbinger Capital is being probed by federal authorities, which are looking into whether the firm gave illegally preferential treatment to its founder and some clients, the Wall Street Journal reported on Friday.
The paper said that the Securities and Exchange Commission and U.S. Attorney’s office in Manhattan are investigating whether Harbinger misled investors by not disclosing soon enough a $113 million personal loan for founder Philip Falcone from the firm’s funds.
The authorities also are also looking into whether Harbinger improperly allowed some clients to withdraw money following the credit crisis, while stopping others from doing so, the paper said.
Falcone, who oversees about $8 billion at his Harbinger Capital Partners, denied the allegations.
“We have never given preferential treatment to any of our investors ever,” Falcone told Reuters in an email. “To think that we would do something like that is grossly false and misleading.”
Falcone added: “Furthermore, the loan was documented and drafted by outside legal counsel who advised us. ... The loan had been disclosed in our audited financials.”
One person who declined to be identified because the investigation is not public told Reuters he was aware regulators were interested in the loan from the hedge fund to Falcone. But a person close to the hedge fund said no regulator or other government official had yet contacted Falcone.
The SEC was not immediately available for comment. Ellen Davis, a spokeswoman for the office of the Manhattan U.S. Attorney, declined to comment on the report.
Harbinger’s two main investment funds are the owners of LightSquared, an upstart Reston, Virginia-based telecom company that plans to use two orbiting satellites to bring high-speed Internet service to some 260 million in the United States by 2015.
Reporting by Megan Davies, Matthew Goldstein, Grant McCool; Editing by Gary Hill
Our Standards: The Thomson Reuters Trust Principles.