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Is the SEC Going After General Counsels?

By Stephanie Rabiner, Esq. on December 18, 2011 | Last updated on March 21, 2019

It's no secret that Philip Falcone's hedge fund, Harbinger Capital Partners, is being investigated by the Securities and Exchange Commission. Both it and the Justice Department are looking into a $113 million loan Falcone took from his funds to pay his 2009 personal taxes. There are also allegations of market manipulation in 2006 and 2008.

But a regulatory filing made public last week included some new information. Falcone, along with fund president Omar Asali, are the not-so-happy recipients of Wells Notices.

A third person at the company also received a Wells Notice: general counsel Robin Roger.

Roger has been Harbinger's general counsel since mid-2009. She walked Falcone through the $113 million loan, which Reuters reports was not disclosed to investors. It was also taken at a time when investors were told they could not access their money.

The SEC rarely goes after general counsel, but could this be the start of a new trend?

Coincidentally, the Association of Corporate Counsel weighed in on this issue during October's annual meeting. Panelists believe that the SEC takes action against general counsel with the hopes of gaining publicity. Though rare, the cases serve as a reminder, urging attorneys to be more cognizant of their conduct.

When such action is taken, there is most often evidence of backdating, CEO misconduct or financial misconduct. And the SEC tends to only go after the top attorney. The agency is also more likely to bring criminal charges against counsel who wore "two hats."

It's thus unlikely that the Robin Roger investigation is the start of a trend, but that doesn't mean you should ignore its occurrence. You never know when the SEC might want to make an example out of you.

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