Phil Falcone's Hedge Funding Days Are Over

Tyler Durden's picture


Moments ago, embattled hedge fund manager Phil Faclone, whose Harbinger Capital seven years ago was more profitable than Federal Reserve Capital Onshore Fund LP, and where every analyst and trader wanted to work, at least until they decided to work for Paulson 3 years later (oops), just settled with the SEC for the plethora of alleged financial wrongdoing that has troubled him in the past four years, and primarily for misuse of client funds such as using client cash to pay his own taxes, in a move that effectively ends his career in not only the hedge fund worlds, but in finance as well. It is unclear if Falcone's prenup-free marriage is also over as a result: we expect a statement from Lisa's PR group shortly.

From the WSJ:

Philip Falcone and his firm Harbinger Capital agreed to a settlement with the Securities and Exchange Commission that could end Mr. Falcone's career as a hedge-fund manager. Harbinger agreed to pay $18 million without admitting or denying allegations of fraud, according to a regulatory filing.


The agreement bars Mr. Falcone from serving as an investment adviser for two years, meaning he also cannot raise new capital or make new investments through the fund.


Terms of the deal allow Mr. Falcone to remain chief executive of Harbinger, although the firm said it wasn't clear how much time he would devote to the job.


Harbinger agreed to be overseen by a monitor, who will oversee the firm and ensure Harbinger is complying with the agreement, according to a person familiar with the matter.


the deal is approved, Mr. Falcone would be barred for two years from "acting as or being an associated person" of any broker, dealer, investment adviser, municipal-securities dealer, municipal adviser, transfer agent, or nationally recognized statistical rating organization, according to the filing.

The full statement can be found in the firm's 10-Q.

In retrospect, one can't help but laugh at the stupidity of Congress, which invited Falcone (and John Paulson) in 2008 as a testifying expert on the hedge fund industry:

So once again, just like with SAC, or with one hit wonders like Paulson, it becomes painfully clear thay when factoring out luck or trading on inside information (pardon SAC lawyers, we meant to say "allegedly", without admitting or denying anything), virtually everyone who has a track record of beating the market consistently does so on illicit grounds.

Of course, if one is large enough to have the scale to become TBTF, and thus control the government itself, not to mention benefit explicitly from the government's multi-trillion bailout of an insolvent financial system (coughwarrencough) one has no need to worry about anything.

And now, we eagerly await the unveiling of Falcone Corzine Skilling (or FaCS in short) Capital LLC.

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Thu, 05/09/2013 - 10:58 | 3544611 idea_hamster
idea_hamster's picture

He will start a new fund with Skilling -- it'll be awesome!

All insider trading + no reported liabilities of any kind = just what the markets need:  YIELD, BABY!

Thu, 05/09/2013 - 11:06 | 3544647 Temporalist
Temporalist's picture

I just sold my grandmother to invest in Falcone, Corzine, Skilling LLP.

Thu, 05/09/2013 - 11:10 | 3544655 Political_Savage
Political_Savage's picture

Now I just need fund managers with names starting with "U" and "K" and my "FUCKS" LLP is complete

They will be solid advisors.

Thu, 05/09/2013 - 11:28 | 3544714 ziggy59
ziggy59's picture

All funds have U, and others, in them...

Thu, 05/09/2013 - 12:13 | 3544867 notbot
notbot's picture

Corzined! Oh wait...Corzine wasn't banned and didn't pay a fine. My bad.

Thu, 05/09/2013 - 13:15 | 3545121 smlbizman
smlbizman's picture

no different than horse trainors with 3x's the norm win percentage , or mcquire and 10,000 more like him or lance asshole armstrong....they all fucking cheat...what else is fucking a matter of point...tell me one thing, anything that is pure?

Thu, 05/09/2013 - 12:47 | 3545013 Colonel Klink
Colonel Klink's picture

Well that sucks because they sold theirs just to fund the ability to fuck you over.

Thu, 05/09/2013 - 12:38 | 3544970 slaughterer
slaughterer's picture

I have been sleeping with Lisa ever since Phil was subpoened.  

Thu, 05/09/2013 - 11:00 | 3544622 i-dog
i-dog's picture

Oooops ... forgot to pay the Vatican!

Thu, 05/09/2013 - 15:57 | 3545891 ToNYC
ToNYC's picture

If you enter their room, you lose.

Thu, 05/09/2013 - 11:04 | 3544633 Seasmoke
Seasmoke's picture

So sorry Lisa.

Thu, 05/09/2013 - 11:08 | 3544650 Temporalist
Temporalist's picture

Why?  Are you her plastic surgeon?

Thu, 05/09/2013 - 11:21 | 3544693 AlaricBalth
Thu, 05/09/2013 - 11:25 | 3544704 ziggy59
ziggy59's picture

Was that before or after?

Or was that after the SEC decision to go after her husband?....just asking

Thu, 05/09/2013 - 11:29 | 3544720 AlaricBalth
AlaricBalth's picture

It was her mug shot for a DUI charge 4 Sep 2012.


"They were careless people, Phil and Lisa--they smashed up things and creatures and then retreated back into their money of their vast carelessness, or whatever it was that kept them together, and let other people clean up the mess they had made."

Apologies to F Scott Fitzgerald, The Great Gatsby, yet this seemed to be apropos. (repost)

Thu, 05/09/2013 - 11:20 | 3544690 jcaz
jcaz's picture

He'll make more money pimping her.....

Thu, 05/09/2013 - 11:04 | 3544638 altgeek
altgeek's picture

"Behind every great fortune there is a great crime."


Thu, 05/09/2013 - 11:06 | 3544646 LetThemEatRand
LetThemEatRand's picture

Funny how these guys get to walk away with most of their own shit intact after raping their clients and violating the law, with "no admission of wrongdoing" wrist slap deals.   If the public were paying any attention they would be really pissed.

Thu, 05/09/2013 - 11:51 | 3544775 Grinder74
Grinder74's picture


Hmmm, he get's barred for two years for millions in "fraud", and someone I know gets barred indefinitely for thousands in "fraud"?

Thu, 05/09/2013 - 11:07 | 3544649 Rainman
Rainman's picture

Wrist slap fine and a ' monitor ' ...... this shit just goes on and on .

Thu, 05/09/2013 - 11:08 | 3544652 Political_Savage
Political_Savage's picture

Cool - Lisa, call me, we can hook up and have fun in my studio apartment.

I hear you're downsizing these days

Thu, 05/09/2013 - 11:10 | 3544656 Ricky Bobby
Ricky Bobby's picture

I think this sums it up perfectly.

Thu, 05/09/2013 - 11:14 | 3544664 Dr. Engali
Dr. Engali's picture

Maybe CNBC will hire him to do a song and dance show with Cramer.

Thu, 05/09/2013 - 11:15 | 3544667 firstdivision
firstdivision's picture

I call dibs on Wilbur

Thu, 05/09/2013 - 11:15 | 3544671 Son of Loki
Son of Loki's picture

anybody but wall street......

Thu, 05/09/2013 - 11:19 | 3544685 NoDebt
NoDebt's picture

If I stole my clients' money to pay my own tax bills what do you think would happen to me?  If I could get away with that little nothing punishment all I can say is "kiss your money goodbye."  All your assets are belong to me!

Thu, 05/09/2013 - 11:35 | 3544708 ziggy59
ziggy59's picture

The Falcone will become a Pigeon

Thu, 05/09/2013 - 11:27 | 3544712 BeetleBailey
BeetleBailey's picture


Stitch this mutt up, Phil.

Any Polaroids or trophies?

No, not this time.

Thu, 05/09/2013 - 11:28 | 3544717 Inthemix96
Inthemix96's picture

I would like to say I'm suprised by this crap but sadly I aint.

Just what have you got to do these days to be locked up for fraud and stealing clients money?

Oh, sorry, you just have to be a bloke on the main street is all, where you can be done for a spliff in your pocket and be given a stretch, but these fuckers can systemicaly remove millions of their customers money and just walk on by.

Fucking disgusting.

Thu, 05/09/2013 - 11:34 | 3544735 ziggy59
ziggy59's picture

Assault on WallStreet comes out friday May10th..manana!

Thu, 05/09/2013 - 11:45 | 3544759 Arius
Arius's picture

yeah well, there is always back to Minessota and starting over ... thats the beauty of America!

good luck Mr. Falcone

Thu, 05/09/2013 - 11:46 | 3544761 doomandbloom
doomandbloom's picture

Doom of Harbinger...

Thu, 05/09/2013 - 11:50 | 3544770 Downtoolong
Downtoolong's picture

Harbinger agreed to pay $18 million without admitting or denying allegations of fraud.

The biggest fraud of all is the SEC, which keeps allowing these frauds to avoid guilt by putting a price on it. We might as well just get it over with and make the SEC a division of the IRS now.


Thu, 05/09/2013 - 12:01 | 3544822 robertocarlos
robertocarlos's picture

And what's wrong with being a hockey rink attendant in Minnesota?

Thu, 05/09/2013 - 12:14 | 3544877 W T F II
W T F II's picture

Joan Rivers would HATE that dress..!!

Thu, 05/09/2013 - 12:38 | 3544969 americanspirit
americanspirit's picture

I have a question for the ZH community, and I'm quite serious here. Does anyone know (or know of) any honest, ethical people in the top ranks of the financial community, anywhere? All we see here and elsewhere in the media are the corrupt, banal, evil, worthless trash. Does anyone know or know of a Jimmy Stewart-type who is for real? Or is this landscape totally bleak?

I have known two bankers in my life who I believe were 100% ethical people who cared about the people in their community and worked hard to help people build businesses, homes, and successful lives. But I am an old guy and that was a long time ago. Just wondering if I am wrong, that there doesn't seem to be any room at the top for anything but the kind of scum that just naturally seems to float to the top of every pool of money these days.

Thu, 05/09/2013 - 12:45 | 3545008 HeavydutyMexica...
HeavydutyMexicanOfTheNorthernKingdom's picture

This is the way it has always been.  There is nothing new under the sun. You reap what you sow.

Thu, 05/09/2013 - 13:37 | 3545189 Thisson
Thisson's picture

It's turtles all the way down.

Thu, 05/09/2013 - 22:45 | 3547013 chindit13
chindit13's picture

I believe you are confusing human nature with the behavior of people in one particular field (that now captures all of our attention).  Yes, plenty of folks at high levels of the FIRE world are unpleasant in the way you described (though guys like Paul Tudor Jones and Brady Dugan don't fit that description), but IMHO just as many regular posters on ZH are unpleasant, banal, and (possibly) evil, and would be much worse if given half the chance.  Just read a typical thread and observe the hateful venom, bizarre conspiratorial nonsense, racism, and broad brush "lamp posts for all" impotent postering.  Look at the ubiquitous arrogance of many who lambast the society of "sheeple";  in other words, people less "awake" or beneath them.  It's all the same as the worst of the Dimons of the world, only Dimon plays in a different league.  Think of it like the World Series vs Kindergarten T-Ball in Keokuk Iowa.  Only one has the big stage.  We're all, me included, "better than everybody else".  It is just that most people lack the means or venue to try to demonstrate that self-belief by granting themselves a different set of rules.

One thing I cannot prove but came to believe:  great wealth changes all but the most careful or strong or luckily self-introspective people.  I'm not talking a few million, but let's say once you pop nine figures, something inside wants to change, or is compelled by "strange forces" to change into something unpleasant.  Call it human nature.  Maybe go back to the old adage absolute power corrupts absolutely.  To achieve something (good or bad), something that places a man in the human outlier category, comes with a psychic cost.  I know money---piles of it---affects people in ways those who lack it can only imagine.  I suspect great fame and adulation do the same.  It takes every bit of character a person can muster to overcome the demon that seems to come with outlier status.

It has always been this way.  It always will.  Is the answer a Hollande-style wealth tax?  I don't think so.  Is it a hundred pounds of buckshot on the back of great ballet dancers, so they won't be able to perform better than anyone else (a Kurt Vonnegut story whose name I have forgotten)?  Look at Tyler's article today on Mao's daughter and see that even in "egalitarian" Commie countries the same thing happens.  Do we accept that such behavior is inevitable, but that to outlaw the kind of success that encourages it takes away more from society than it adds?  There's that other old adage that has always been a personal favorite of mine:  if my demons leave me I fear my angels will soon follow.  I would prefer not to believe that line, but I suppose it is spot on true.

In the end, we probably want a society that provides incentive, but that has some rule of law aimed at obviating the kind of behavior that, sadly, comes natural.  To each according to his abilities, but forever equal under the law.  Even with that, everyone has to be willing to do his part to make sure power and control of those who achieve outlier status is limited.  Don't let bankers write Dodd-Frank.  Don't let Reese Witherspoon think she can drive drunk (or whatever she did).  Make the phrase "Do you know who I am?" meaningless.  Jamie and his ilk are never going to go away, but it is the responsibility of everyone who is not Jamie to rein him in.  Maybe this is not a direct answer to your question, but I believe it is a proper explanation of an undeniable human truth.

Fri, 05/10/2013 - 00:09 | 3547214 Augustus
Augustus's picture

That is a chilling look on the wife. 

Life with her could involve dealing with sacks of squirrels daily.

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