Haverhill Retirement System v. Asali

Updated: October 20, 2014
Status: Ongoing Case
On March 26, 2014, Labaton Sucharow filed a complaint on behalf of Haverhill Retirement System in an action against the board of directors of Harbinger Group Inc. (HGI) and various other defendants. An amended complaint was filed on May 5, 2014, which alleges that the board of HGI facillitated a bailout of HGI's CEO and controlling shareholder, Philip Falcone, at the expense of the HGI and its shareholders.

Falcone is known for running the hedge fund Harbinger Capital Partners and related funds (collectively, the Harbinger Funds). In recent years, the Harbinger funds have faced an avalanche of client redemption requests due to poor performance, fraud charges, and a recent admission of wrongdoing to the U.S. Securities and Exchange Commission. To meet the redemption requests, Falcone orchestrated a sale of a significant amount of his HGI stock to Leucadia National Corporation. As part of the sale, it is alleged that Falcone abused his position of power within HGI by bargaining away valuable HGI assets, including board seats to Leucadia, to improve the terms of the deal and retain de facto control over the Company. While Falcone is free to sell his shares to whomever he wants, he cannot abuse his position of power within HGI to extract personal benefits to the detriment of the company and its public shareholders.

We expect that the court will hold a hearing on the motions shortly thereafter and issue an opinion by the end of October or November.

The case is Haverhill Retirement System v. Asali, No. 9474-VCL (Del. Ch.). The plaintiff is Haverhill Retirement System. The defendant is the board of directors of Harbinger Group Inc. (HGI).