Harbinger Sues Ergen and Dish over LightSquared

Harbinger Capital Parnters has slapped Charlie Ergen and Dish Network with a lawsuit alleging they have “engaged in a fraudulent scheme” to take control of LightSquared, the bankrupt wireless services provider headed by hedge fund guru Philip Falcone.

The suit, filed in the U.S. Bankruptcy Court, Southern District of New York, also named EchoStar Corp., SP Special Opportunities and L-Band Acquisition LLC, claiming they teamed to snap up LightSquared debt “in secret to gain an advantage” in taking over LightSquared’s assets and to prevent LightSquared from emerging from bankruptcy under Harbinger’s control, according to Bloomberg.

The suit seeks $4 billion -- $2 billion in compensation and $2 billion in punitive damages – and to undo the loan purchases orchestrated by Ergen and his affiliates, Reuters reported.

LightSquared filed for bankruptcy protection last year after it hit a snag in its plans for a nationwide Long Term Evolution network. Its  wireless frequencies were tentatively approved by the Federal Communications Commission in 2011, but that was pulled in 2012 after the agency determined in tests that the service would interfere with Global Positioning Satellite frequencies.

In July, Dish emerged as a “stalking horse” bidder for LightSquared LP. Ergen bid $2.22 billion for LightSquared’s assets – mainly a slice of 46 Megahertz L-Band MSS wireless spectrum, via L-Band Acquisition, a Dish wholly-owned subsidiary.  Dish put in the bid after it failed to acquire Sprint and Clearwire in separate deals.  Ergen made a $2 billion offer for LightSquared’s assets in May.

Ergen defended himself Tuesday when the Harbinger lawsuit came up on Dish’s second quarter earnings call. “I personally followed all the rules,” Ergen said. “I think Dish has followed all the rules and we responded in an appropriate way. We’ll let the courts and public opinion decide who is fraudulent and who’s not.”