Judge Dismisses Falcone Suit Against Harbinger, Dish

By Joseph Checkler 

A judge on Tuesday dismissed Philip Falcone's racketeering lawsuit against Dish Network Corp. and Chairman Charlie Ergen over Mr. Ergen's investment in LightSquared, calling Mr. Falcone's argument "frivolous."

In a decision filed with U.S. District Court in Colorado, Judge William J. Martinez also said the claims by Mr. Falcone and his Harbinger Capital Partners hedge fund firm are too similar to ones it made in a lawsuit filed as part of LightSquared's bankruptcy case, an argument Dish and Mr. Ergen made in their bid to dismiss the suit.

A spokesman for Dish and Mr. Ergen declined to comment on the decision. Mr. Falcone didn't immediately respond to a request for comment.

The judge took particular aim at Harbinger's contention that Mr. Ergen bought up LightSquared's debt as part of a plan to make a lowball bid for LightSquared through an investment vehicle he controlled.

"In everyday life, parties regularly bid low, sometimes laughably low," Judge Martinez wrote. "That does not make such bids unfair."

Mr. Falcone last July sued both Mr. Ergen and Dish for at least $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. Under RICO, originally designed to prosecute organized crime, parties can seek more damages than is typically allowed.

Mr. Ergen, who said he and not Dish was making the LightSquared offer, eventually dropped his bid to buy LightSquared, though he retained the debt he owned in the company.

After nearly three years of reorganization plans that either fell through or were rejected by a judge, LightSquared finally got its chapter 11 reorganization plan approved last month. The proposal gives control of the company to investors including Fortress Investment Group LLC and Centerbridge Partners, and allows Mr. Falcone and Harbinger to maintain more than 44% of the company's equity without day-to-day power.

Crucially, the plan--which was the latest of many proposals to reorganize LightSquared--pays Mr. Ergen, LightSquared's biggest creditor, in full and in cash for his claim of more than $1 billion.

But until the plan is implemented, which could take place before the end of the year, the company will continue to lose money. It has lost more than $2 billion since filing for bankruptcy in May 2012, mostly due to interest it owes on its debt.

LightSquared filed for chapter 11 shortly after federal regulators refused to clear its plans to launch its wireless network, which Mr. Falcone has hoped could one day provide low-cost mobile services to hundreds of millions of U.S. citizens. The regulators heeded warnings from the GPS industry that the network could interfere with GPS.

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.

Write to Joseph Checkler at [e-mail]

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