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 In a court filing on Friday, Ergen asked the judge overseeing
LightSquared's Chapter 11 bankruptcy case for permission to bring a
lawsuit alleging Falcone mismanaged the company, focusing on
preserving his own investment at the expense of other stakeholders.
Ergen, who once made money playing Blackjack, compared Falcone to
someone with a gambling problem.
"Just as a compulsive gambler will hang onto a long-shot wager far
past the point he should have cut his losses, Mr. Falcone tightened
his grip on the direction of LightSquared's restructuring as the
company's outlook deteriorated," lawyers for Ergen's investment
vehicle said in the filing.
LightSquared, majority-owned by Harbinger, went bankrupt in 2012,
when the Federal Communications Commission revoked its license to
operate spectrum out of concern it could interfere with GPS systems.
Ergen then acquired about $1 billion of the company's senior loan
debt, giving him a controlling stake in LightSquared's capital
structure.
The case has become a messy fight between Ergen and Falcone for
control of the company. Ergen's filing on Friday is a step toward
going on the offensive in a case in which he has generally been on
the defensive.
LightSquared has already sued Ergen, saying he acquired his debt
illegally to set the stage for a Dish takeover. Ergen countered that
he bought the debt solely for his personal portfolio.
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Meanwhile, other LightSquared lenders have accused Ergen of a
bait-and-switch in which a Dish unit made a $2.2 billion offer for
LightSquared, then revoked the offer earlier this year in an attempt
to scoop up the company later at a lower price. Ergen blamed the
withdrawal on an unidentified "technical issue."
Judge Shelley Chapman, in U.S. Bankruptcy Court in New York, is not
expected to rule on whether Ergen acted improperly until next month.
The question of Ergen's motives is central to LightSquared's plan to
exit bankruptcy, which essentially requires a finding that Ergen
acted surreptitiously.
The case is In re: LightSquared Inc et al, U.S. Bankruptcy Court,
Southern District of New York, No 12-12080.
(Reporting by Narottam Medhora in Bangalore and Nick Brown in New
York; editing by Lisa Shumaker)
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