Falcone Relaunches $1.5 Billion Suit Against Dish, Ergen

Philip Falcone and his Harbinger Capital Partners hedge fund firm filed a racketeering lawsuit against Dish Network Corp. and Chairman Charles Ergen in New York over their investment in LightSquared, less than three months after a Colorado judge dismissed a similar suit.

In the six-count suit, filed Tuesday with U.S. District Court in Manhattan, Mr. Falcone and Harbinger again seek $1.5 billion, saying Mr. Ergen violated the Racketeer Influenced and Corrupt Organizations Act when he acquired the debt of LightSquared—the wireless venture controlled by Harbinger—as Dish was making a bid for the company in bankruptcy court.

While Dish eventually dropped the bid and Mr. Ergen is set to be paid in full for the debt he acquired, the transactions hurt Mr. Falcone and Harbinger in their investment in LightSquared, the suit says.

Harbinger says Mr. Ergen's purchases caused it to lose money and control of the LightSquared board. Mr. Falcone and other Harbinger officials resigned from the board as part of negotiations for a bankruptcy court restructuring.

"Defendants wrongfully and deceptively created chaos in the chapter 11 cases directed at disabling Harbinger—the only stakeholder with a large enough interest to act against their scheme and, as the largest equity holder, the party most interested in maximizing the estate's value," Harbinger said in the lawsuit.

A spokesman for Dish and Mr. Ergen declined a request for comment. The suit demands a jury trial.

Dish had called the Colorado suit Harbinger's "desperate" attempt to find someone to blame for its $2 billion loss in LightSquared.

Mr. Falcone, who controls LightSquared's equity, will maintain at least a 44% stake in the company when it emerges from chapter 11, although he won't have day-to-day say in the wireless spectrum venture's operations.

Under RICO, originally designed to prosecute organized crime, parties can seek more damages than is typically allowed. Mr. Falcone's similar RICO suit against Dish and Mr. Ergen, filed last July, was dismissed by a Colorado judge in late April, although the judge said the suit could be refiled elsewhere. In the new suit, Harbinger emphasizes that the judge didn't weigh in on the racketeering or tort claims made in the suit.

Litigation surrounding LightSquared has been a hallmark of the company throughout its bankruptcy case, which began in May 2012. Last week, a judge effectively dismissed a suit by Dish shareholders over the company's and Mr. Ergen's LightSquared investment. Earlier this year, a judge dismissed most of Harbinger's suit against GPS related companies and industry groups over their warnings that LightSquared's network could interfere with GPS, warnings heeded by regulators that eventually led to LightSquared's network not getting cleared.

LightSquared filed for chapter 11 shortly after federal regulators heeded those GPS warnings and refused to clear the network. Mr. Falcone has hoped the company could one day provide low-cost mobile services to hundreds of millions of U.S. citizens.

LightSquared isn't able to fully use spectrum, limited pockets of airwaves that mobile-phone and Internet companies use, that it owns without support from the Federal Communications Commission.

When it emerges from chapter 11, which could come later this year, the company is poised to be controlled by investors including Fortress Investment Group LLC and Centerbridge Partners.

Write to Joseph Checkler at [e-mail]

Access Investor Kit for DISH Network Corp.

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