November 29, 2021

Volume XI, Number 333

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November 29, 2021

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Former Chief Operating Officer Settles SEC Fraud Claims - Harbinger Capital Partners LLC

The Securities and Exchange Commission recently announced that Peter Jenson, the former chief operating officer of Harbinger Capital Partners LLC, agreed to pay a $200,000 civil penalty to resolve charges that he aided the firm and its owner, Phillip Falcone, in misappropriating fund assets to pay Falcone’s personal taxes

According to the SEC, in 2009, Falcone owed federal and state authorities $113.2 million in taxes and elected to pay that amount using a loan from Harbinger Capital Partners Special Situations Fund, L.P. (Special Situations Fund). The SEC alleged that Falcone and Harbinger, aided by Jenson, made several material misrepresentations and omissions in seeking legal advice regarding the loan and in subsequent communications with investors, including: the ability of the Special Situations Fund to furnish the loan without disadvantaging investors; the terms and conditions of the loan, including the interest rate charged and the amount of collateral posted by Falcone; and the role of Harbinger’s outside legal counsel in vetting the transaction. 

Jenson also agreed to admit certain facts and that his conduct violated the federal securities laws. Among other things, Jenson admitted that he failed to ensure that the Special Situations Fund retained separate counsel, failed to ensure that Falcone paid an “above market” interest rate and failed to timely disclose the loan to investors. 

In addition, Jenson agreed to be prohibited from working in the securities industry for at least two years, and to be suspended for at least two years from practicing as an accountant on behalf of any publicly traded company or other entity regulated by the SEC.   

The settlement papers were filed in the US District Court for the Southern District of New York and must be approved by the District Court. The deal follows an $18 million settlement in August 2013 with Harbinger and Falcone, who agreed to a five-year ban from the financial industry and admitted wrongdoing as part of the scheme. 

U.S. Securities and Exchange Commission v. Harbinger Capital Partners LLC, Case No 1:12-cv-05028 (S.D.N.Y. July 28, 2014).

©2021 Katten Muchin Rosenman LLPNational Law Review, Volume IV, Number 215
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