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.
[7]
From the WSJ [8]:
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. [9]
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.