Harbinger's Falcone 'Regrets' Loan Troubles

Dec 2 2010 | 7:55pm ET

Given the outcry from regulators and investors, Harbinger Capital Partners' Philip Falcone says he's not sure that he'd take another loan from the hedge fund.

A $113 million loan to pay an unexpected tax bill has contributed to increased redemptions from the firm and sparked investigations by the Securities and Exchange Commission and U.S. Justice Dept. And that means the loan probably wasn't worth it.

"In 20/20 hindsight, I regret being in this position," Falcone told The New York Times. "This has not been a fun process."

But Falcone still defends the loan noting that it was checked by the firm's lawyers and that much of his own billions is invested in Harbinger's funds.

"It's not like I have $113 million in my checking account," he said.

Investors haven't only been troubled by the loan. Falcone has poured some 40% of Harbinger's assets into his wireless broadband venture, making many clients nervous. He admits, "these periods are never fun."

But Falcone is defiant that Harbinger will have no trouble meeting redemption requests. "The last thing I'm thinking about in the morning is whether I have a cash-flow problem," he told the Times.

"I'm not getting out of the hedge fund business," Falcone added. "This business has been very good to me. We've gone through rough patches before and we'll go through them again."

He is, however, positioning himself to skirt one of the more unpleasant aspects of running a hedge fund, the vicissitudes of clients. Falcone last year set up a listed permanent capital vehicle, and last month raised $350 million for it.

"I do have a vision for this thing, and it will be a big part of my future," he said.


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