Dish Network Chairman Charles Ergen has asked a judge to throw out the fraud lawsuit brought against him by Harbinger Capital Partners, amidst reports that a Dish director resigned over fears of a conflict of interest over Ergen's interest in Harbinger's wireless Internet venture.
Harbinger sued Ergen last month, accusing him of fraudulently acquiring LightSquared's debt to sabotage its own bankruptcy plans. In seeking the dismissal, Ergen turned that argument around, telling a judge that the lawsuit was merely Harbinger chief Philip Falcone's bid to sink Ergen's proposed $2.2 billion deal for LightSquared.
"This case is Harbinger's, and Mr. Falcone's, last-ditch effort to retain control of LightSquared, at the expense of all other constituents in the bankruptcy," Ergen's lawyers said in a court filing.
Harbinger alleges that Ergen used hedge fund Sound Point Capital as a front to buy up some $1 billion in LightSquared debt, and that Sound Point repeatedly ignored its inquiries as to who was behind its "corporate façade." Dish itself is barred from buying LightSquared debt by a covenant that keeps competitors from investing.
But Ergen said that neither he nor Sound Point made any "false representations" about the purchases.
Still, the filing came on the same day that The Wall Street Journal reports that Dish director Gary Howard resigned from its board over fears that Ergen was ignoring concerns about a conflict of interest in Dish's bid for LightSquared. Ergen could personally earn hundreds of millions of dollars on the deal.
Howard, who had served on Dish's board for eight years, was one of two members of the special committee of the board, both independent directors, to recommend the deal. But he quit after the full board disbanded the committee against its recommendations that it be kept involved in the LightSquared bid.
The two members were worried that the deal would look bad for Dish and Ergen, and suggested that Ergen pass some of his profits to Dish shareholders.
Howard did not explain his resignation, a move which would have forced Dish to make a public disclosure.