Analyst: Harbinger's hiring of law firm could indicate plan to sue FCC over LightSquared

Harbinger Capital Partners, the principal backer of bankrupt wireless firm LightSquared, has hired a law firm that specializes in litigation with the federal government, which could indicate that Harbinger plans to sue the FCC as LightSquared tries to reorganize itself in bankruptcy protection.

Earlier this week the law firm of Cooper & Kirk made a filing with the FCC detailing a meeting that David Thompson, a managing partner at the firm, held with staff members of the FCC and representatives from the Department of Justice on May 23.

The filing notes the "billions of dollars" that the hedge fund Harbinger (and, implicitly, the man behind the fund, Philip Falcone), spent "to acquire LightSquared and finance an agreed-upon plan for a broadband wireless network that satisfied the terms established by the FCC." LightSquared entered bankruptcy protection in May 2012 after the FCC revoked its conditional license to operate because of unresolved concerns that LightSquared's planned LTE-based network in the L-band would interfere with GPS receivers.

The filing states that "these problems were not of Harbinger's making. Rather, as the FCC acknowledges, they were the result of the GPS industry's improper use of the L-band spectrum. Moreover, by taking this action, the federal government has effectively reallocated the L-band spectrum to the GPS industry, contrary to its obligations to Harbinger under their agreement."

Most notably and pointedly, the filing "urged the FCC to mitigate further damage to Harbinger by taking immediate, positive action in this matter."

On its website, Cooper & Kirk boasts that, according to the Legal Times, it is "the top choice for plaintiffs who want to sue the federal government." It's unclear if the filing signals that Harbinger is preparing to sue the FCC. Thompson was not immediately available for comment, according to the firm.

"They're putting the government on notice that they intend to sue," TMF Associates analyst Tim Farrar told the New York Post, adding that "the only reason they [DOJ] would be there is to defend the federal government in the event of a lawsuit."

On his blog, Farrar expanded upon this theory, and wrote that it "may be Falcone's last effort to avoid being excluded from the resolution of LightSquared's bankruptcy case."

"If Harbinger is excluded from the reorganization, then it would not benefit financially from the increase in spectrum value resulting from a future FCC approval (or indeed any proceeds from the litigation against the GPS industry)," Farrar wrote. "As a result, if that happens Harbinger is threatening to sue on its own account, because litigation would likely block any possibility of progress at the FCC, and Harbinger would not have any incentive to drop that litigation as part of a settlement which resulted in an FCC approval. Thus Falcone is basically offering the threat of mutually assured destruction to persuade the other LightSquared debtholders to give him a share of the reorganized company."

Currently, LightSquared and its creditors, including Dish Network (NASDAQ: DISH) Chairman Charlie Ergen, are entering into court-ordered mediation to settle on a restructuring plan.

U.S. Bankruptcy Court Judge Shelley Chapman has given the sides until June 3 to come up with a plan to get LightSquared out of bankruptcy protection, or else they will have to go to mediation under Judge Robert Drain, a Chapman colleague who oversaw the 2012 bankruptcy of Hostess Brands, according to Reuters.

Paul Basta, a lawyer for an independent committee supervising the LightSquared restructuring, said the different sides have talked about a global restructuring that would require new financing, Reuters reported, but it's unclear how that deal would be structured or where the financing would come from.

For more:
- see this FCC filing
- see this Cooper & Kirk website
- see this NY Post article
- see this TMF Associates blog post
- see this Reuters article

Related Articles:
Judge tosses out LightSquared's latest bankruptcy plan
LightSquared could get FCC approval to use spectrum by year-end, witness says
Report: LightSquared plan to exit bankruptcy rests on unwilling regulators
Dish withdraws $2.2B bid for LightSquared's spectrum
LightSquared seeks benefits of FCC spectrum approvals, fights Dish bankruptcy plan

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