Activist investor makes new push for HC2 board to remove
chief Falcone: letter
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[March 30, 2020] BOSTON
(Reuters) - An activist investor is stepping up calls for the board of
HC2 Holdings Inc <HCHC.N> to remove Chief Executive and Chairman Philip
Falcone as the former hedge fund manager faces mounting legal and
financial troubles.
MG Capital, run by former Third Point executive Michael Gorzynski, said
for the second time in two months that it wants Falcone out. Gorzynski
asked lead independent director Wayne Barr in a letter seen by Reuters a
"to facilitate the removal of Mr. Falcone."
In February the fund, which owns 5% of HC2 along with its partners,
criticized the company's financial performance and said it wanted to
replace the entire board, including Falcone, with six directors of its
own.
Now, Gorzynski is focusing more on Falcone, whose bets on the overheated
housing market at his Harbinger Capital turned him, briefly, into a
billionaire. Last year his net worth was closer to $300 million, he told
lawyers.
"Based on Mr. Falcone's well-documented financial, legal and regulatory
issues, MG Capital - and presumably other stockholders - remains
perplexed by the incumbent Board's focus on preserving HC2's status
quo," MG Capital said in the letter.
HC2 has businesses in construction, marine services and several other
sectors. A spokesman for the firm was not immediately available for
comment.
An MG spokesman confirmed the content of the letter.
In the last six weeks, Falcone has been sued for more than $65.8 million
for allegedly defaulting on loans and had his assets frozen for failing
to pay lawyers. Last year HC2 was ordered by a court to withhold some of
Falcone's wages to satisfy unpaid obligations after he was ordered to
pay New York City $2.69 million in unpaid taxes.
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Philip Falcone, chief executive officer and chief investment officer
for Harbinger Capital Partners, participates in a panel discussion
during the Skybridge Alternatives (SALT) Conference in Las Vegas,
Nevada May, 9, 2012. SALT brings together public policy officials,
capital allocators, and hedge fund managers to discuss financial
markets. REUTERS/Steve Marcus
"We remain deeply troubled by the impact that Mr. Falcone's apparent financial
distress and legal issues may have on HC2," MG Capital said.
In papers filed Feb. 21 with the New York State Supreme Court in Manhattan,
Melody Business Finance LLC said Falcone and affiliates reneged on obligations
to repay loans, which date from 2013 to 2017, and improperly sold some of the
underlying collateral, including an Andy Warhol painting.
Alex Spiro, a partner at Quinn Emanuel Urquhart & Sullivan representing Falcone,
said in an statement: "This is a personal dispute without merit. We will fight
this."
In early March, Justice Arthur Engoron froze Falcone's assets after he failed to
pay $13.6 million to law firm Dontzin Nagy & Fleissig.
The firm represented Falcone in 2013 when he settled allegations with the
Securities and Exchange Commission that he borrowed $113 million from his hedge
fund to pay personal taxes and gave preferential treatment to certain clients
when he halted redemptions.
Gorzynski in the letter to Barr said MG would "engage in a constructive
one-to-one dialogue with you and the other directors once Mr. Falcone has been
removed."
(Reporting by Svea Herbst-Bayliss; Editing by Christopher Cushing)
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