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Harbinger Sues Dish Chairman Over Secret Plan to Take Control of LightSquared

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Philip Falcone's Harbinger Capital Partners has sued Dish Network's Chairman Charles Ergen seeking USD2 billion in damages and a further USD2 billion in compensation after they accused him of seeking to take control of the bankrupt LightSquared mobile network via debt purchases.

According to the lawsuit, Ergen has fraudulently being buying up around US$1 biullion worth of debt secured on its assets, despite a credit agreement with the lenders to protect the company from sales to potential competitors.

Although LightSquared was blocked from launching its LTE network due to interference problems with GPS receivers, and subsequently filed for bankruptcy, the company is still sitting on a large chunk of valuable spectrum.

Meanwhile Dish Network, which lost out in bids to but Sprint Nextel and take a stake in Clearwire is still looking around for a mobile network partner for its own mobile plans.

According to the lawsuit, an Ergen investment vehicle known as Sound Point made its purchases, "often at significant discounts to par," and has now become LightSquared's largest creditor, giving it significant sway over how the debt is restuctured by the bankruptcy court.

Sound Point is alleged to have concealed its links to Dish Network's Chairman in order to avoid raising suspicion that he was building up the stake.

The lawsuit also claims that the Ergen holding company made promises to buy debt which were later repeatedly deferred, and thus delayed attempts by LightSquared to renegotiate its debt.

"Ergen deliberately kept these trades open in order to prevent Harbinger from raising the capital it needed for Harbinger to cash out all of LightSquared's creditors and preserve its controlling equity interest," the lawsuit claims.

Ergen has denied any wrongdoing.

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Tags: harbinger capital  lightsquared  dish network  USA