|American fund billionaire Falcone banned for raiding client funds to pay personal taxes
Hedge fund star Philip Falcone agreed to an US$18 million fine and a five-year ban to settle charges that he tapped fund assets to pay his taxes, the SEC said.
The Securities and Exchange Commission said Monday Falcone and his Harbinger Capital Partners agreed to admit guilt in the 2012 case, in which the SEC accused Falcone of improperly using US$113 million in assets from his hedge funds to pay his own personal taxes.
Falcone, who raked in billions in 2007 betting against packaged mortgage securities ahead of the US real-estate crash, admitted: “multiple acts of misconduct that harmed investors and interfered with the normal functioning of the securities markets,'' the SEC said.
In addition to raiding client funds to make his tax payments, the SEC said Falcone had given preferential treatment to investors who supported a controversial Falcone-backed board initiative on one Harbinger fund.
“Falcone and Harbinger engaged in serious misconduct that harmed investors, and their admissions leave no doubt that they violated the federal securities laws,'' said Andrew Ceresney, co-director of the SEC's Division of Enforcement, in a statement.
“Falcone must now pay a heavy price for his misconduct by surrendering millions of dollars and being barred from the hedge fund industry.''
Falcone accepted a five-year ban from the securities industry, though he is permitted to assist with the liquidation of his hedge funds.