SPSO looks to prosecute 'valuable' LightSquared claims against Falcone

By Caroline Salls

Pittsburgh, April 4 - SP Special Opportunities, LLC (SPSO) requested court approval to prosecute and/or settle what it called potentially hundreds of millions of dollars in claims of LightSquared Inc.'s estates against LightSquared director Philip Falcone, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

"In willful and reckless disregard for his fiduciary duties as a director of LightSquared, Mr. Falcone has infected these cases with selfish motives that have upended the design and purpose of the Bankruptcy Code - the fair treatment of all of a debtor's stakeholders in accordance with the priority of their claims and interests," SPSO said in the motion.

"Falcone tightened his grip on the direction of LightSquared's restructuring as the company's outlook deteriorated, when the prudent course would have been to turn over the keys and preserve value for the stakeholders he is bound by law to serve."

SPSO said Falcone guided the company into bankruptcy "where he thought he could take advantage of the breathing spell afforded by the Bankruptcy Code" to await Federal Communications Commission approval.

However, SPSO said after two years in bankruptcy the only indication from the FCC is that no approval will be coming this year.

SPSO said Falcone's main interest is maintaining his equity stake in LightSquared and that interest has replaced attention to his fiduciary duties.

"At every turn, Mr. Falcone has caused LightSquared to avoid a potentially value maximizing transaction that would bring these cases to a close," the motion said.

In addition, SPSO said Falcone has filed, threatened to file or caused LightSquared to move forward with "meritless litigation," which would be considered hostile if take by an outsider and illegal if attempted by a director in violation of the automatic stay.

"At best, such litigation has wasted millions of estate dollars," SPSO said. "At worst, Mr. Falcone's actions have jeopardized and undermined LightSquared's chances of achieving the one goal that could save the company - FCC approval."

SPSO said LightSquared has a new source of value in the potential claims against Falcone, but it decided to abandon the claims and "to affirmatively release them."

LightSquared is a Reston, Va.-based wholesale-only 4G-LTE network integrated with satellite coverage. The company filed for bankruptcy on May 14, 2012 under Chapter 11 case number 12-12080.

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