By Brendan Sasso - 12/11/11 12:05 PM EST
Federal regulators notified Harbinger Capital, the primary investor in wireless firm LightSquared, that they are considering suing the hedge fund over potential violations of securities laws.
Philip Falcone, the head of Harbinger Capital, and other employees received "Wells Notices" from the Securities and Exchange Commission informing them of the possible action, the firm acknowledged on Friday.
Harbinger says any enforcement action is unwarranted.
The firm is currently undergoing another round of testing to determine if technical modifications have addressed the interference problem.
Sen. Chuck Grassley (R-Iowa) said the possible SEC action shows that the Federal Communications Commission (FCC) should release more information about its review of LightSquared.
"Now the FCC is faced with the real possibility that it made a multi-billion-dollar grant of valuable spectrum to someone who could be charged with violating securities laws," Grassley said in a news release on Friday. "Now, more than ever, the FCC chairman should lead the effort to provide documents and offer insight into how the agency decided to give Mr. Falcone, Harbinger Capital and LightSquared this multi-billion-dollar grant.”
Grassley has pledged to block President Obama's two nominees to the FCC unless the agency releases internal documents related to LightSquared.
FCC officials have said they will not give LightSquared final approval to launch its network until it can prove it has addressed the interference problem.