Falcone Sues Dish, Ergen For $1.5B Over LightSquared

NEW YORK (The Deal) -- As LightSquared Inc. begins an accelerated summer schedule to confirm its new reorganization plan, backer Philip Falcone is suing the company's largest creditor for more than $1.5 billion.

Falcone's Harbinger Capital Partners alleged that Charlie Ergen, Dish Network (DISH) and other parties engaged in racketeering, fraud and other activities. The complaint was filed Tuesday in the U.S. District Court for the District of Colorado. Harbinger has requested a jury trial.

Falcone and Ergen have butted heads frequently during LightSquared's bankruptcy.

Ergen is the company's largest creditor, with more than $1 billion in secured claims, including interest. Terms of the credit agreement barred Dish from purchasing the secured loans, but Ergen acquired the debt through a personal vehicle called SP Special Opportunities LLC.

Harbinger alleges that Ergen purchased debt as part of a scheme to buy the debtor's wireless spectrum at a discount and to undermine the reorganization.

Falcone's hedge fund alleges that Ergen, Dish and other parties "abused the bankruptcy proceedings, withheld crucial evidence, and engaged in a 'troubling pattern of noncredible testimony,'" in pleadings filed by its New York counsel Kasowitz, Benson, Torres & Friedman LLP and Denver firm Reilly Pozner LLP.

"Defendants wrongfully and deceptively created chaos in the bankruptcy proceedings so that Harbinger would lose control of the LightSquared board to which it was contractually entitled," the complaint alleges.

In addition, the plaintiff claims that Ergen and his cohorts "lied under oath during critical trial testimony" in a proceedings held by Judge Shelley Chapman in the U.S. Bankruptcy Court for the Southern District of New York.

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