Philip Falcone, the billionaire hedge-fund manager whose largest investment went bankrupt after being blocked by regulators, now faces a showdown in court with the Securities and Exchange Commission, Bloomberg News reported today. Falcone, the founder of Harbinger Capital Partners LLC, may be sued by the regulator as soon as this week over claims he improperly borrowed client money to pay his taxes. He may also face claims that he gave preferential treatment to Goldman Sachs Group Inc., an investor in his fund, and manipulated markets when trading bonds of MAAX Holdings Inc. The SEC voted to authorize enforcement staff to sue after Falcone in 2009 took out a $113 million loan from his Special Situations fund to pay personal taxes. The loan was disclosed in the fund's annual financial statement the following March. At the time he borrowed the money, clients were barred from pulling money from the fund. Falcone subsequently repaid the loan with interest.
