Dish CEO Wins Latest Skirmish in LightSquared Fight
Dish Network Corp CEO Charlie Ergen has won a round in his battle with the hedge fund Harbinger Capital Partners over the fate of bankrupt LightSquared Inc. Harbinger sought to undo what it claimed was a fraudulent scheme by Ergen to become LightSquared's biggest lender, thereby weakening Harbinger's influence over the wireless communications company.
On Tuesday U.S. Bankruptcy Judge Shelley Chapman in Manhattan dismissed Harbinger's case from the bench, stating that the hedge fund lacked standing. She said she would issue a written decision later. She noted that Lightsquared's debtors could raise identical fraud claims. "If there are such causes of action against the Ergen defendants, they belong to the debtors and not Harbinger," she said, according to a transcript.
Chapman's ruling is a win for Robert Giuffra of Sullivan & Cromwell, who represents Dish, as well as James Dugan and Rachel Strickland of Willkie Farr & Gallagher, who represent Ergen. David Friedman of Kasowitz Benson Torres & Friedman represents Harbinger.
Before entering bankruptcy, LightSquared had planned to build a nationwide wireless telephone company. Harbinger, which is controlled by hedge fund titan Philip Falcone, owns the majority of LightSquared's equity. Ergen is the single largest creditor, with $1 billion of LightSqaured's debt, which gives him the power to block Harbinger's reorganization efforts. Ergen supports a reorganization plan that would allow Dish to bid for LightSquared's wireless spectrum in an auction. Under Ergen's plan, LightSquared would also pay back the $1 billion in debt it owes him.
Harbinger's lawyers at Kasowitz Benson argue that LightSquared's debt agreements prohibit competitors like Ergen from buying the company's debt. They maintain he fraudulently acquired the $1 billion in debt through 26 secret transactions using his corporate entities.
Sullivan & Cromwell's Guifra, who represents Dish, declined to comment. Dish said in a statement that it's pleased with Chapman's ruling, and that it "looks forward to pursuing its bid in the upcoming auction for the LightSquared assets."
Kasowitz Benson's Friedman did not immediately return a call seeking comment.