LightSquared controlling shareholder complaint targets Ergen, entities

By Caroline Salls

Pittsburgh, Aug. 6 - LightSquared Inc. controlling shareholder Harbinger Capital Partners LLC, HGW US Holding Co. LP, Blue Line DZM Corp. and Harbinger Capital Partners SP, Inc. (collectively Harbinger) filed a complaint Tuesday against Charles W. Ergen and entities he controls to seek redress for fraud and other conduct aimed at misappropriating Harbinger's control over and investment in LightSquared.

According to the complaint filed with the U.S. Bankruptcy Court for the Southern District of New York, the defendants' conduct also destroyed Harbinger's contractual rights and business opportunities relating to the LightSquared investment.

In addition to Ergen, the defendants are EchoStar Corp., Dish Network Corp., L-Band Acquisition LLC, SP Special Opportunities LLC, SP Special Opportunities Holdings LLC, Sound Point Capital Management LP and Stephen Ketchum.

Harbinger said several of the defendants, aided and abetted by defendants SP Capital and Ketchum, "are engaged in a fraudulent scheme to deprive Harbinger of its investment in and control of LightSquared and its valuable wireless spectrum, prevent LightSquared - a potential competitor to Dish and EchoStar - from emerging from bankruptcy under Harbinger's control and misappropriate the valuable spectrum assets at a discount to their true value."

Harbinger alleged that the defendants' fraudulent scheme will give Ergen and his entities an unfair advantage as a bidder for the spectrum assets.

If the alleged scheme succeeds, it will cost Harbinger billions of dollars in additional damages, the complaint said.

"Through this concerted plan of misconduct, defendants have stymied Harbinger's efforts to propose and implement a full cash-pay plan and otherwise protect the unique value of its controlling investment in LightSquared," the complaint said.

Harbinger said it is seeking the equitable disallowance of Sound Point loan debt, as well as compensatory and punitive damages with respect to its plenary claims for fraud, tortious interference with contract and prospective economic advantage, unfair competition and civil conspiracy, in amounts to be determined at trial.

LightSquared is a Reston, Va.-based wholesale-only 4G-LTE network integrated with satellite coverage. The company filed for bankruptcy on May 14, 2012 under Chapter 11 case number 12-12080.

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