Harbinger Renews Fraud, Racketeering Claims Against Dish, Ergen

Dish Network, CEO Charles Ergen and EchoStar conspired to get LightSquared's spectrum "at fire-sale prices" through widespread racketeering and fraud, Harbinger Capital said in a lawsuit in U.S. District Court in Manhattan asking for $1.5 billion in damages from Ergen, Dish, investment banker Stephen Ketchum and his Sound Point Capital Management. The litigation is similar to a Harbinger suit filed one year ago in U.S. District Court in Denver (see 1407100060) and thrown out in April on summary judgment. Harbinger -- which held most of LightSquared's common equity --- also made similar arguments in 2013 in a complaint filed in U.S. Bankruptcy Court as part of LightSquared's Chapter 11 bankruptcy. The latest suit alleges Ketchum, who had a long-standing relationship with Ergen, used Sound Point to set up an investment vehicle, SPSO, through which Ergen bought large amounts of LightSquared debt to get at its spectrum. Meanwhile, Ergen's LBAC -- now a subsidiary of Dish -- also tried to purchase that spectrum with a $2 billion bid -- substantially lower than estimates in a pair of valuations Ergen had. After LightSquared filed for bankruptcy, U.S. Bankruptcy Court decided Harbinger had a conflict in considering that bid between the best course for protecting its stake and best course for LightSquared, and the court ordered creation of an independent committee to handle LightSquared's reorganization or sale, with Harbinger losing its say in the running of the company. Though LightSquared's reorganization plan saw Harbinger made partially whole, the investment company is seeking damages for the loss of the control rights it once had as Dish and Ergen "effectively breached the 'outer limits' of what is acceptable in a bankruptcy proceeding," Harbinger said in its suit filed Tuesday. Dish declined to comment Wednesday. Though Harbinger accused EchoStar of being part of the racketeering effort, it's not among the defendants.