As if the recent scandals surrounding Harbinger's redemptions, his money withdrawals from a locked up fund, and his pledging of artwork to procure a loan for a mysterious capital need were not enough, next we read courtesy of Matt Goldstein that Phil Falcone is also facing an informal probe in the fund's "investments and trading in
securities of particular issuers." What is very curious is that Harbinger Group was once the very infamous Zapata Corp, which has been implicated in everything from the Kennedy assassination, to the Bay of Pigs, to Watergate, to Iran Contra! While we will ignore any possible link between Falcone and the Bushes (not to mention the CIA), we will point out that Phil Falcone is chairman and CEO of the current iteration of Zapata, and that Harbinger Inc and Harbinger Capital Partners are intimately tied. And this is where the real problems arise.
In the most recent 10-Q we read:
The Harbinger Parties and their affiliates routinely cooperate with governmental and regulatory examinations, information-gathering requests (including informal requests, subpoenas, and orders seeking documents, testimony, and other information), and investigations and proceedings (both formal and informal). The Harbinger Parties and their affiliates are currently cooperating with informal investigations with respect to particular investments and trading in securities of particular issuers.
The silver lining: at least for now there does not appear to be any imminent litigation:
The Harbinger Parties and their affiliates or investment funds are not
currently parties to any litigation or formal enforcement proceeding
brought by any governmental or regulatory authority.
Nonetheless, this is yet another piece of news that an already ailing Harbinger certainly does not need made public to his ever more skittish LPs, whose recent redemptions have caused the AUM for the once might hedge fund to plunge from $26 billion to $7 billion currently.
As for Harbinger Group., Inc which appears to be a shell for an investment company with $141 million of cash and short-term investments on the books, and no operations, is currently being assimilated by Falcone in an elaborate scheme for his Spectrum Brands shares, which would bring his total holding in Zapata from 51.6% to 94%.
Some more details on the transaction:
The Harbinger Parties currently own 9,950,061 shares of the Company’s common stock, or approximately 51.6% of the outstanding common stock of the Company, and 34,256,905 shares of SB Holdings common stock. The consummation of the Spectrum Brands Acquisition will result in the following: (i) the Harbinger Parties will together own approximately 93.3% of the Company’s outstanding common stock; (ii) SB Holdings will become the Company’s majority-owned subsidiary and its results will be consolidated with the Company’s results in its financial statements; (iii) the Company will own approximately 54.4% of the outstanding SB Holdings common stock, or 54.1% of the fully diluted shares; (iv) Harbinger Master Fund will own approximately 12.7% of the outstanding and fully diluted shares of SB Holdings common stock; and (v) the remaining 32.9% of the outstanding SB Holdings common stock, or approximately 32.7% of the fully diluted shares, will continue to be owned by stockholders of SB Holdings who are not affiliated with the Harbinger Parties. SB Holdings common stock will continue to be traded on the NYSE under the symbol “SPB” following the consummation of the Spectrum Brands Acquisition.
Also, in the 10-Q we read some very interesting recent developments at Harbinger Group:
On October 8, 2010, the Company filed a Current Report on Form 8-K disclosing that it received an offer from the Harbinger Master Fund (i) to assign to the Company the Harbinger Master Fund’s rights to acquire Old Mutual U.S. Life Holdings, Inc. and (ii) to transfer to the Company the Harbinger Master Fund’s interest in Front Street Re, Ltd. (together, the “Insurance Transaction”). After further discussing financing alternatives and the Insurance Transaction as currently proposed, the Company and the Master Fund determined not to proceed with the Insurance Transaction by the Company. The parties may reconsider the Insurance Transaction by the Company on different terms in the future, but there is no proposal at this time and there can be no assurance that there will be an alternate proposal in the future.
On November 5, 2010, the Company priced $350 million aggregate principal amount of its 10.625% senior secured notes due 2015 (the “Notes”). The Notes will be sold in a private placement pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, subject to market and other conditions. The Notes will be issued at a price equal to 98.587% of the principal amount thereof. The Company expects the offering to close on November 15, 2010, subject to the satisfaction of customary closing conditions. The Company intends to use the net proceeds from the offering for general corporate purposes, which may include acquisitions and other investments. The net proceeds of the offering will be held in a segregated escrow account until consummation of the Spectrum Brands Acquisition. If the escrow conditions are not fulfilled by March 31, 2011, the Company will redeem the Notes at the issue price of the Notes, plus accrued yield and accrued and unpaid interest.
While the second transaction seems to be somewhat benign, the first one is odd, as one would be curious to find out whether any of the recent developments w/r/t Harbinger's LP issues may have foiled the Old Mutual rights transfer.
Probably most curiously, here are some very interesting sections on predecessor company Zapata Corp, from Wikipedia.
Two Federal Bureau of Investigation
(FBI) memoranda have been offered to show connections between the CIA
and George H. W. Bush during his time at Zapata. The first memo names
Zapata Off-Shore and was written by FBI Special Agent Graham Kitchel on
22 November 1963, regarding the John F. Kennedy assassination
at 12:30 p.m. CST that day. It begins: "At 1:45 p.m. Mr. GEORGE H. W.
BUSH, President of the Zapata Off-Shore Drilling Company, Houston,
Texas, residence 5525 Briar, Houston, telephonically furnished the
following information to writer. .. BUSH stated that he wanted to be
kept confidential. .. was proceeding to Dallas, Texas, would remain in
the Sheraton-Dallas Hotel."
A second FBI memorandum, written by J. Edgar Hoover,
identifies "George Bush" with the CIA. It is dated 29 November 1963 and
refers to a briefing given Bush on 23 November. The FBI Director
describes a briefing about JFK's murder "orally furnished to Mr. George
Bush of the Central Intelligence Agency. .. [by] this Bureau" on
"December 20, 1963.
When this second memorandum surfaced during the 1988 presidential
campaign, Bush spokespersons (including Stephen Hart) said Hoover's memo
referred to another George Bush who worked for the CIA.
CIA spokeswoman Sharron Basso suggested it was referring to a George
William Bush. However, others described this G. William Bush as a "lowly
researcher" and "coast and beach analyst" who worked only with
documents and photos at the CIA in Virginia from September 1963 to
February 1964, with a low rank of GS-5. Moreover, this G. William Bush swore an affidavit in federal court denying that Hoover's memo referred to him:
"I have carefully reviewed the FBI memorandum to the Director, Bureau
of Intelligence and Research, Department of State dated November 29,
1963 which mentions a Mr. George Bush of the Central Intelligence
Agency. ... I do not recognize the contents of the memorandum as
information furnished to me orally or otherwise during the time I was at
the CIA. In fact, during my time at the CIA, I did not receive any oral
communications from any government agency of any nature whatsoever. I
did not receive any information relating to the Kennedy assassination
during my time at the CIA from the FBI. Based on the above, it is my
conclusion that I am not the Mr. George Bush of the Central Intelligence
Agency referred to in the memorandum." (United States District Court
for the District of Columbia, Civil Action 88-2600 GHR, Archives and
Research Center v. Central Intelligence Agency, Affidavit of George William Bush, September 21, 1988.)
Allegations of the involvement of a former CIA officer in the foundation of Zapata
On January 8, 2007, newly released internal CIA documents revealed
that Zapata had in fact emerged from Bush's collaboration with a covert
CIA officer in the 1950s. According to a CIA internal memo dated
November 29, 1975, Zapata Petroleum began in 1953 through Bush's joint
efforts with Thomas J. Devine,
a CIA staffer who had resigned his agency position that same year to go
into private business, but who continued to work for the CIA under
commercial cover. Devine would later accompany Bush to Vietnam
in late 1967 as a "cleared and witting commercial asset" of the agency,
acted as his informal foreign affairs advisor, and had a close
relationship with him through 1975.
Bay of Pigs
The CIA codename for the Bay of Pigs invasion of April 1961 was "Operation Zapata". Through his work with Zapata Off-Shore, Bush is alleged to have come into contact with Felix Rodriguez, Barry Seal, Porter Goss, and E. Howard Hunt, around the time of the Bay of Pigs operation.
CIA liaison officer Col. L. (Leroy) Fletcher Prouty alleges that Zapata Off-Shore provided or was used as cover for two of the ships used in the Bay of Pigs invasion: the Barbara J and Houston. Prouty claims he delivered two ships to an inactive Naval Base near Elizabeth City, North Carolina, for a CIA contact and he suspected very strongly that George Bush must have been involved:
They asked me to see if we could find – purchase – a couple of
transport ships. We got some people that were in that business, and they
went along the coast and they found two old ships that we purchased and
sent down to Elizabeth City and began to load with an awful lot of
trucks that the Army was sending down there. We deck-loaded the trucks,
and got all of their supplies on board. Everything that they needed was
on two ships. It was rather interesting to note, looking back these
days, that one of the ships was called the Houston, and the other ship
was called the Barbara J. Colonel Hawkins had renamed the program as we
selected a name for the Bay of Pigs operation. The code name was
"Zapata." I was thinking a few months ago of what a coincidence that is.
When Mr. Bush graduated from Yale, back there in the days when I was a
professor at Yale, he formed an oil company, called "Zapata", with a
man, Lieddke, who later on became president of Pennzoil. But the company
that Lieddke and Mr. Bush formed was the Zapata Oil Company. Mr.
Bush's wife's name is Barbara J. And Mr. Bush claims as his hometown
Houston, Texas. Now the triple coincidence there is strange; but I think
it's interesting. I know nothing about its meaning. But these invasion
ships were the Barbara J and the Houston, and the program was "Zapata."
George Bush must have been somewhere around.
John Loftus writes: "Prouty's credibility, however has been widely attacked because of his consultancy to Oliver Stone's film JFK." but notes on page 598 that: "While his credibility has suffered greatly because of his consultancy to Oliver Stone's film JFK, his recollections about the CIA supply mission have been confirmed by other sources."
Nevertheless, researcher James K. Olmstead claims to have discovered a
CIA memorandum which states that the boats were leased, not purchased,
by the Garcia Line Corporation with offices in Havana
and New York City. The owners were Alfredo Garcia and his five sons.
The CIA was using the Rio Escondido for "exfiltrating anti-Castro
leaders......prior to 1961 BOP planning." It had brought out Nino Diaz,
and Manolo Ray. Its captain Gus Tirado was well known to the CIA.
Eduardo Garcia met with two CIA agents in NYC and D.C. to arrange the
use of the Garcia ships for the invasion. The alleged price was $600.00
per day per ship plus fuel, food and personnel.
Eduardo selected and hired 30 men who were "executioners for Batista"
Miro Cardona of the Frente and the CIA did not like the choice of men
hired to protect the Garcia ships. "Nobody questioned that Eduardo was
coming along with the expedition. "I'm going to be in charge of my
ships", he said.
Memorandum From the Chief of WH/4/PM, Central Intelligence Agency
(Hawkins) to the Chief of WH/4 of the Directorate for Plans (Esterline)
The Barbara J (LCI), now enroute to the United States from Puerto Rico,
requires repairs which may take up to two weeks for completion. The
sister ship, the Blagar, is outfitting in Miami, and its crew is being
assembled. It is expected that both vessels will be fully operational by
mid-January at the latest. In view of the difficulty and delay
encountered in purchasing, outfitting and readying for sea the two
LCI's, the decision has been reached to purchase no more major vessels,
but to charter them instead. The motor ship, Rio Escondido (converted
LCT) will be chartered this week and one additional steam ship, somewhat
larger, will be chartered early in February. Both ships belong to a Panamanian
Corporation controlled by the Garcia family of Cuba, who are actively
cooperating with this Project. These two ships will provide sufficient
lift for troops and supplies in the invasion operation.
The Bay of Pigs operation was directed out of the "Miami Station"
(also known as "JM/WAVE"), which was the CIA's largest station
worldwide. It housed 200 agents who handled approximately 2,000 Cubans.
Robert Reynolds was the CIA's Miami station chief from September 1960 to
October 1961. He was replaced by career-CIA officer Theodore Shackley, who oversaw Operation Mongoose, Operation 40 (including Porter Goss, Felix Rodriguez, Barry Seal),
and others. When Bush became CIA Director in 1976 he appointed Ted
Shackley as Deputy Director of Covert Operations. When Bush became Vice
President in 1981, he appointed Donald Gregg as his National Security Advisor.
discusses George Bush's "highly likely" peripheral role in the Bay of
Pigs events. He points to the leadership role of Bush's fellow Skull and Bones
alumni in organizing the operation. He notes an additional personal
factor for Bush: the Walker side of the family (who initially funded
Zapata Corporation) had apparently lost a small fortune when Fidel
Castro nationalized their West Indies Sugar Co. Edwin Pauley was "known for CIA connections", according to Phillips, it was Pauley who put Pemargo's Diaz and Bush together.
Phillips and others have detailed subsequent involvement by Zapata associates in the Watergate affair. George Bush, as Richard Nixon's ambassador to the United Nations, allegedly urged his former Zapata partner Bill Liedtke to launder $100,000 to the White House plumbers. After Nixon's 1972 re-election, he appointed Bush as Chairman of the Republican Party National Committee. When the laundering was exposed, those involved included several CIA officials: E. Howard Hunt, Frank Sturgis, Eugenio Martínez, Virgilio González, and Bernard Barker. A discussion of the laundering appears on the Nixon tapes for June 23, 1973.
Michael Maholy alleges that Zapata Off-Shore was used as part of a CIA drug-smuggling ring to pay for arming Nicaraguan Contras in 1986-1988, including Rodriguez, Eugene Hasenfus
and others. Mahony claims Zapata's oil rigs were used as staging bases
for drug shipments, allegedly named "Operation Whale Watch." Mahony
allegedly worked for Naval Intelligence, US State Department and CIA for