Methods to Lose $2 Billion in 10 Years: Unpaid Payments Pile Up for Former Hedge-Fund Star

Previously 12 months, he has battled to hold on to 3 houses and misplaced one in every of them to a creditor. Current collectors embrace one in every of his longtime attorneys, a limousine firm and ex-employees. The Inside Income Service is coming after him for $7.7 million.

Mr. Falcone, as soon as a hedge-fund star, owed greater than $100 million as of earlier this 12 months, based on public information detailing judgments, the federal tax lien and different money owed. Collectors have sought to freeze his financial institution accounts, garnish his wages and take his inventory in an organization he runs, however that hasn’t made a lot of a dent for a lot of of them.

“Mr. Falcone has made it his mission to not pay this cash,” New York State Supreme Court docket Justice Arthur Engoron, who oversees quite a lot of the collectors’ instances, stated throughout a listening to this 12 months in a case filed by New York state.

His critics say that like a cat with 9 lives, Mr. Falcone finds methods to stay lavishly and pursue new ventures regardless of his money owed. Mr. Falcone, in contrast, portrays himself in courtroom paperwork and public appearances as a cash-strapped sufferer whose enterprise success has been thwarted again and again by forces exterior his management.

Mr. Falcone continued to reside in his high-end New York Metropolis and Hamptons houses whereas information confirmed he was behind on mortgage funds and metropolis property taxes. His youngsters stored attending non-public faculty when he fell behind on tuition. The official handle for his new firm is his longtime Park Avenue workplace, the place the proprietor sued him claiming unpaid hire.

Mr. Falcone not too long ago owned properties and a stake in his hedge fund’s investments, however these property have been largely pledged as collateral for one mortgage, paperwork present. Earlier this 12 months, he turned chief govt of a penny-stock firm during which he now owns a 79% stake, based on securities filings.

Mr. Falcone stated in emails that the details about his money owed in public information was months old-fashioned and that they now stand at round $45 million. He stated asset gross sales helped him to pay down the debt. “Yesterday is already within the rearview mirror,” he stated in a textual content message. “I’m wanting ahead and I like what I see, in actual fact, I like what I see.”

He additionally questioned The Wall Road Journal’s accounting of his monetary state of affairs. “Does it embrace my offshore acct or

Madison Applied sciences

?” he requested in an electronic mail. He didn’t present additional particulars on any offshore account, together with how a lot cash it would maintain.

Madison Applied sciences is a latest identify of the penny-stock firm, now referred to as Go.TV Inc., which says it should revolutionize broadcast tv. The corporate plans to purchase up low-price native TV stations and construct out a nationwide platform for individuals who use antennas.

Go.TV’s different latest enterprise concerned shaving kits branded by actress Catherine Zeta-Jones. A lawyer for Ms. Zeta-Jones stated that enterprise was transferred to a separate firm and that she has no relationship with Mr. Falcone.

Mr. Falcone’s identify is misspelled in an organization pitch deck to traders, and his biography is stuffed with dummy copy starting “Lorem ipsum dolor sit amet.” The corporate is backed by greater than $16 million from New York agency Area Buyers LP. “Area is a lender secured by sure of the TV stations/franchises of the general public firm…not a lender on to Mr. Falcone,” a spokesman stated.

Go.TV put Mr. Falcone’s shares within the agency into two trusts, which his legal professionals stated have been out of attain of collectors. (He has used attorneys in a few of his latest litigation.) Justice Engoron stated on the listening to within the state case that the transfer constituted fraud, and that he was “tempted to throw Mr. Falcone in jail instantly.”

Mr. Falcone’s lawyer stated on the listening to that he didn’t consider that was Mr. Falcone’s intent and that his consumer merely needed to “present for his youngsters for the longer term.”

New York state pursued the shares to satisfy a $12 million judgment implementing a 2018 settlement that Mr. Falcone entered, however did not pay, to resolve allegations of tax evasion by a hedge-fund entity.

Mr. Falcone stated in an electronic mail that the quantity he owes New York state is now decrease. He turned over a few of his shares in his new firm held within the trusts to assist fulfill the judgment, two individuals conversant in the matter stated.

Mr. Falcone turned a hedge-fund billionaire betting on the subprime mortgage disaster. Then traders pulled cash from his agency, Harbinger Capital Companions LLC, after a stretch of spotty returns. In 2013, the Securities and Change Fee hit him with a five-year business ban as a part of a settlement during which Mr. Falcone admitted to taking a $113 million mortgage from one in every of his funds to pay his private taxes.

He and his spouse, Lisa Falcone, lived massive, however their wealth dwindled after different dangerous wagers didn’t work out. One massive bust was a telecom firm referred to as LightSquared Inc. that filed for chapter in 2012.

Across the time of the SEC settlement, Mr. Falcone stopped paying many high Harbinger workers, based on courtroom paperwork that included an interview with Mr. Falcone. Some have been ultimately paid within the following years, based on the interview.

Different associates began submitting fits claiming lack of cost. New York automobile service Surrey Cadillac Limousine took him to courtroom, alleging that he didn’t pay for $34,000 price of rides in 2014 and 2015. The legislation agency that represented Mr. Falcone within the SEC case and different issues stated he owed it cash and received a $14 million judgment towards him.

Mr. Falcone stated in an electronic mail the judgment is now decrease. Matthew Dontzin, founding companion on the agency, stated Mr. Falcone has made solely “modest funds…on account of our endlessly chasing him.” Mr. Falcone stated within the interview within the legislation agency’s case that he continued to fly on his Gulfstream jet and Sikorsky helicopter after the SEC settlement.

“You realize what occurs with individuals who attain a sure stature in life: They begin to suppose they’re invincible,” stated Pat Ciullo, proprietor of Surrey Cadillac Limousine. He stated his firm reached a settlement with Mr. Falcone and was paid.

Forbes pegged Mr. Falcone’s web price at greater than $2 billion at its peak. By 2018, his web price was greater than $300 million, based on an accounting by Mr. Falcone that’s cited in courtroom paperwork. It isn’t clear how a lot he’s price now.

Harbinger’s remaining holdings not too long ago included a stake within the postbankruptcy LightSquared, generally known as Ligado Networks. Mr. Falcone stated in courtroom in August 2020 that the Ligado funding may wind up being price tons of of thousands and thousands of {dollars} however is “fully up within the air.” That firm continues to grapple with regulatory points. A Ligado spokeswoman didn’t reply to a request for remark.

Harbinger additionally held a big stake in a on line casino in Vietnam, the place the federal government typically restricts residents from playing. Harbinger bought the majority of that funding in 2019, however the cash went to cowl “third-party bills,” Mr. Falcone stated in a listening to.

Harbinger’s property beneath administration have been $336 million in 2020, based on a regulatory submitting. In its heyday over a decade in the past, it managed $26 billion, the Journal beforehand reported.

Mr. Falcone has stated he has did not pay his money owed as a result of a lot of his remaining fortune is tied up in these illiquid investments. In an electronic mail to a real-estate agent, Mr. Falcone in contrast his state of affairs to that of the primary character within the movie “127 Hours” who amputates his personal arm when he turns into trapped beneath a boulder. Ms. Falcone’s manufacturing firm backed the 2010 movie.

Getting paid could be a yearslong course of for collectors. These whose loans are backed by collateral reminiscent of houses and vehicles can promote these property to fulfill the debt. Unsecured lenders should hunt for different property, reminiscent of financial institution accounts, wages or properties not pledged for different loans.

Lots of the Falcones’ property, together with the New York houses, art work and jewellery, have been pledged as collateral for a mortgage from Melody Enterprise Finance LLC, with a principal quantity of $73 million, based on courtroom paperwork in a case filed by the lender. Mr. Falcone defaulted in 2016, prompting curiosity to start out mounting at a 20% price, the paperwork say.

Mr. Falcone stated in courtroom information that he bought off his St. Barts property in 2019 and paid $29 million on the Melody mortgage. Melody sued Mr. Falcone for reimbursement final 12 months, accusing him of promoting a number of the artwork backing the mortgage with out giving the proceeds to the lender. Mr. Falcone stated in a courtroom submitting that Melody was conscious of the artwork gross sales in query.

At one level Melody tried to ship somebody to gather the artwork, however was “largely ignored or met with excuses,” based on a doc filed by Melody.

Melody scheduled an public sale involving the Falcones’ New York properties for April, but it surely was halted and the 2 sides reached a settlement, based on courtroom filings. Mr. Falcone stated in an electronic mail the mortgage steadiness is now “a boatload decrease.” His New York Metropolis townhouse is listed as beneath contract to be bought. Melody representatives didn’t reply to requests for remark.

His decadelong battle with the many individuals he owes cash continues. One other limousine firm and a former Harbinger govt stated in courtroom that he owes them cash, too. Financial institution of America Corp. stated in courtroom filings he has a roughly $200,000 past-due credit-card invoice.

The proprietor of the constructing the place he rents places of work stated in a lawsuit that Mr. Falcone owes $4 million in unpaid hire. Mr. Falcone stated in a textual content message that he “signed an settlement with [the] landlord.” There is no such thing as a settlement within the courtroom docket and an lawyer for the owner didn’t reply to a request for remark.

Earlier this 12 months, a creditor with a judgment excellent towards him took possession of his Minnesota lake home, valued at about $375,000. Mr. Falcone grew up within the space and the property is surrounded by comparable houses owned by a few of his siblings. He has till subsequent 12 months to purchase it again, based on a courtroom doc. He stated he plans to do this.

Write to Rachel Louise Ensign at rachel.ensign@wsj.com