Falcone’s folly

Philip Falcone’s street fighter instincts and penchant for ultra-risky investments helped catapult him into the gilded club of Wall Street’s elite.

But his winning streak ended in Washington, where the founder of Harbinger Capital Partners and former professional hockey player has been bodychecked by regulators.

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LightSquared, Harbinger’s $3 billion investment, fell into bankruptcy last week after a dramatic inside-the-Beltway battle to create a wireless network that would compete with titans AT&T and Verizon Wireless.

The company was an ambitious bet on unproven technology, and it ran into major technical hurdles. Devices on the proposed network were found to interfere with the Global Positioning System crucial to military and aviation safety. But Falcone’s plan to turn junk airwaves into a goldmine could have worked, observers say, if he had come prepared with a far more low-tech set of tools: The political and lobbying skills needed to close a deal in the nation’s capitol.

“Doing business with Washington, D.C., is very risky, even when you have an incredible idea that can save an industry from a rapidly growing threat,” said Jeffrey Kagan, a telecom and tech analyst. “Do it the right way and you win. Do it the wrong way and you are LightSquared.”

GPS makers say Falcone’s venture was doomed from the start and that the company is now blaming a vast lobbying conspiracy for problems that stem more from its own lack of due diligence.

“Sometimes the truth does prevail in Washington,” said Jim Kirkland, vice president of GPS maker, Trimble. “Suggesting that lobbyists blocked LightSquared ignores the massive technical evidence of interference that led government GPS users, including the Defense Department and the Federal Aviation Administration, to conclude that LightSquared’s proposal was not technically feasible.”

Either way, LightSquared’s debacle is a cautionary tale in Washington, where vast fortunes are made and lost at the hand of regulators.

The outsider

From his perch on Park Avenue, Falcone was more than a world removed from Washington.

The hard-charging financier, known to use hockey metaphors in strategy sessions, came from the secretive hedge fund world. There, investment plans are cooked up with extremely complicated financial models, kept sealed under lock and key. But when dealing with regulators, meetings and plans become public — particularly at the Federal Communications Commission. Savvy businesses manage their lobbying much like a political campaign, with talking points to convince lawmakers and regulators that the business is good for the country, too.

Falcone and executives at Reston-based LightSquared were caught off guard by the firestorm over the issue of interfering with the GPS system. A four-star Air Force general and aviation officials testified at hearings that planes could drop out of the sky if the network were launched as planned.

Falcone also underestimated the resolve of Republican opponents who branded him as a rich crony of the Obama administration and suggested that he had curried special favors for the fledgling satellite venture.