Philip Falcone

Harbinger Capital Management’s new permanent capital vehicle has found itself the target of litigious, unhappy investors.

Alan Kahn, an investor in Harbinger Group, has sued the acquisitions company over Harbinger’s plan to transfer its stake in Spectrum Brands Holdings. Under that plan, Harbinger hedge funds will see their stake in Harbinger Group grow to 93%, with Harbinger Group taking on the Spectrum stake in exchange. But that means Harbinger Group is “vastly overpaying” for the stake, Kahn alleges.

The deal means that Harbinger will have “suffered no loss of control over Spectrum,” the Delaware lawsuit says. “Thus HCP has diluted the minority shares; acquired a virtually 100% interest in HGI; and at the same time managed to maintain control over the very consideration that it has ‘paid’ as consideration of the deal. Such blatant self-dealing is unconscionable.”

The complaint also names Harbinger founder Philip Falcone.

Kahn wants a judge to overturn the deal, which allows Falcone to be “the overwhelming majority owner of a publicly-traded company where he answers to no one,” the lawsuit alleges. “Indeed, he will no longer need to appease dissatisfied investors that have fled his fund in the wake of his personal cash crunch.”

Falcone has found himself under fire for a $113 million loan he took from his hedge funds to pay a tax bill. Falcone has also taken at least two personal loans from banks in recent months, including a $22.5 million mortgage on his Manhattan mansion.

Source

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