SEC commissioners have rejected the
proposed enforcement settlement with Philip Falcone and
his firm Harbinger Capital Partners ($3.1B
in AUM) in New York (IA
Watch, July 2, 2012).
The SEC won’t confirm this news but it was revealed in a July 19th 8-K
filing by Harbinger’s parent.
The 8-K states the RIA learned July 18th that the “Commission
voted not to approve the previously disclosed agreement in principle between
the enforcement staff.” According to press reports, the settlement included
an $18 million fine and a two-year ban for Falcone, who had been charged with allegedly borrowing $113 million from one of the RIA’s
funds to pay his taxes and not disclosing the transaction to investors.
The news didn’t surprise John Coffee,
law professor at Columbia Law School in New
York. “I think the SEC should have been embarrassed by that settlement,” he
says. It was “weak” and “stood out like a sore thumb.”
New Chair Mary Jo White has been lobbied
to avoid settlements that permit defendants to deny any wrongdoing and to
even take some cases to trial (IA
Watch, June 17, 2013). Asked if the rejected settlement stands
as a harbinger of a tougher SEC under White, one securities attorney in Washington,
D.C., who asked not to identified, said no – that this, and the newly announced
case against Steven A. Cohen (see this
story) were in the works long before White became chair.
