Harbinger Capital Partners, the hedge fund behind LightSquared, is suing the US government for breaking promises that it claims contributed to the failure of the mobile broadband venture, The Wall Street Journal reported.
In a suit filed in the US Court of Federal Claims in Washington, the firm said the Federal Communications Commission (FCC) breached an agreement to allow it to acquire LightSquared by blocking the deployment of its network which lead to bankruptcy proceedings.
GPS companies said in 2012 that due to the spectrum held by LightSquared being in close proximity to the airwaves they use, the prospective LTE network could interfere with these services. The FCC felt these concerns were justified and subsequently decided to stop LightSquared deploying its network.
LightSquared filed for Chapter 11 bankruptcy soon after the FCC’s decision, blaming the government’s actions for its plight.
The legal filing said Harbinger lost most of its investment in LightSquared, which totalled approximately $1.9 billion, and was made on the strength of the government agreement to allow it “to build, deploy, and operate a nationwide broadband network using LightSquared’s spectrum”.
Harbinger is seeking damages for alleged breach of contract, breach of good faith and what it calls the government’s “unconditional” taking of private property without just compensation. It also alleged that GPS companies “unlawfully” used spectrum owned by LightSquared.
Harbinger sued the GPS companies in 2013, arguing that it would not have invested so much in LightSquared if their concerns had been raised earlier. The GPS companies denied any wrongdoing.
Harbinger currently controls the equity of LightSquared but will own much less if a bankruptcy proposal is approved in which 74 per cent of the venture is given to various investors, leaving Harbinger with 12.5 per cent of equity. LightSquared wants the plan to be approved by the end of September.
US satellite TV company Dish Network made a bid for LightSquared’s spectrum which it later abandoned. However, Charlie Ergen, chairman of Dish, bought up LightSquared’s bank debt to become its largest creditor.
Philip Falcone, who founded Harbinger, recently resigned from the LightSquared board, along with other representatives from the hedge fund, according to The Wall Street Journal.
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