Falcone follies

Hedge-fund billionaire Phil Falcone got pummeled with a double dose of bad news yesterday — a one-two punch that could knock the legs out from under his already limping career.

The 49-year-old’s $3 billion investment in LightSquared was slammed late yesterday when it emerged that the 4G wireless venture failed a major government test that is expected to severely cripple its chances of getting off the ground this year.

That blow was preceded by the news that Falcone and two high-ranking employees of his $5.7 billion hedge fund, Harbinger Capital, were served with Wells Notices by the Securities and Exchange Commission for alleged securities violations. Such notices offer warning from SEC staffers that they plan to recommend that the agency proceed with a civil suit.

Meanwhile, investors were told they would be left holding the bag amid the storm. In announcing the SEC action, Harbinger said it plans to cut off withdrawals by the end of the month, leaving investors with no time to get their money back before the gates come crashing down.

“He’s done, as far as raising money ever again from outside investors,” said one Harbinger investor, who asked not to be named.

“If someone wants to sue him, I’ll tag along,” the investor said of Falcone, who’s worth an estimated $2.2 billion and whose name can be seen on a placard gracing the posh High Line park in Chelsea.

The stage is nearly set for a spectacular fall from grace for Falcone, who rose to hedge-fund stardom in 2008 following his brilliant bets against toxic mortgages, which resulted in gains of over 100 percent that year.

Falcone’s performance has been on and off ever since. But other things have irked investors — including the $113 million loan he took from his funds to pay his personal taxes. The money has since been paid back.

Investors were also up in arms when Falcone invested $2.9 billion of the fund’s assets into LightSquared. They feared the investment could block them from getting their money out.

Indeed, Falcone has recently been giving LightSquared stock to hedge-fund investors who redeem their shares.

The Reston, Va., venture, which aims to build out a new super-fast, nationwide wireless network, was to be Falcone’s saving grace.

But the project has been hit with complaints from farmers and the military that it interferes with global positioning systems. LightSquared has countered that the interference is minimal.

A draft of a report due next week, however, was leaked yesterday to Bloomberg, revealing that LightSquared interfered with up to 75 percent of GPS devices.

That could severely dampen the chances that LightSquared will get government approval.

Martin Harriman, a LightSquared executive, blasted the leak as a “breach” of protocol and said the conclusions drawn from the leaked report are “patently false” because they don’t take into consideration LightSquared’s “mitigation proposal.”