Don't look down, Phil Falcone. Don't look down!

Until the other day, I'd never heard of Philip Falcone. Which is probably just as well, because there's really no room on my dance card for yet another ahole.

Who is Philip Falcone? Why, he's a former hedge fund manager and erstwhile billionaire who's refusing to pay off the relatively meager settlement ($60K) he agreed to with his one-time private chef. 

Brian Villanueva, who was making $100K a year to feed the Falcone family:

...sued Falcone and his wife in federal court in New York last year, claiming they created a hostile work environment in which he was mocked for his Asian heritage with stereotypical accents and jokes about eating dogs. Villanueva is a Filipino. (Source: Bloomberg)

If I didn't like dogs so much, it would be cool if Villanueva had revenge-slipped a bit of pooch into the boeuf bourgignon. Or a scoop or two of Alpo. In any case, the Falcones are now claiming that they don't have the $60K they need to make good the settlement with Villanueva. 

To Villanueva, this sounds like nonsense. He's filing a new suit against Falcone -  and I suspect is looking for more than $60K at this point, as $60K minus contingency lawyers' fees won't amount to all that much. He calls BS on Falcone's assertion that he's broke, pointing to the sale of an $80M townhouse last year. 

Of course, he could well be broke and owing, say $80M on the $80M townhouse. 

Falcone "earned" his way to billionaire status "betting against the U.S. housing market." Which, back in ought-eight was certainly a smarty-pants move.

But then, as so often happens with sketchy individuals, he ran into some problems:

Falcone was barred from the securities industry for at least five years as part of a 2013 settlement. U.S. regulators had accused him of improperly borrowing money from the fund to pay personal taxes and giving preferential treatment to some investors. Under the deal, he admitted no wrongdoing.

And as so often happens with sketchy individuals, he's bounced back:

His current firm, HC2 [presumably named after his earlier firm, the well-named Harbinger Capital], owns companies in construction, energy, the life sciences, telecommunications and other industries, according to its website.

But the bounce back may not be as bouncy as Falcone might have hoped, as I found when I saw an article on him that appeared in April in Institutional Investor, the People magazine of the financial services biz. 

Falcone, it seems, has done a lot of borrowing from a firm, Melody Capital Partners, that makes loans that are backed by your tangible assets. Like your homes, your jewelry, your works of art. Of which Falcone had aplenty. And because Falcone had so many things, Melody thought he was a sure bet. 

Melody went to court after learning last fall that Falcone had sold two paintings (including a Warhol) that were part of the collateral backing the loans. Instead of delivering the proceeds from the sale to Melody as promised, the money went into a Connecticut bank account held by Falcone. (Source: Institutional Investor)

Falcone sings a different tune, claiming that he's working things out with Melody

“It’s not like I’m not doing things. It’s not like I haven’t taken measures. You can only do so much, and looking at the things that I need to do and continue to do, there’s no question I think I will solve them all,” he tells Institutional Investor in a 75-minute interview from his $30 million dollar Hamptons home — one of two backing the Melody loan — where he and his family are hunkered down during the coronavirus pandemic.

And, sure, he owes Melody a lot of money. But he owes a lot of entitities a lot of money: former lawyers, the City of New York, a jet servicing company. The claims outstanding against him, which may or may not include the $60K he owes Chef Villanueva, rack up to a whopping $80M plus. (Whopping by my standards, anyway. Perhaps not by the standards of an ex-billionaire. But even though $80M seems whopping, he's owed more in the past...)

He's also got shareholder activists (who've fingered Falcone as "a primary source of value destruction", accusing him of mismanagement and self-dealing) crawling up his back, and government regulators. 

To hear Falcone talk, he’s simply had a string of undeserved bad luck. “There’s a whole sequence of events here that, quite frankly, was really unfortunate for me personally,” he says.

He likes to point out his modest beginnings: the youngest of nine, growing up in a 3-bedroom house in the Minnesota Iron Range, with a father who never made more than $15K a year. His ticket out: a hockey scholarship to Harvard. 

He's the first to admit that, when he had money, he went with it.

In 2008, fresh off his big year, the hedge fund manager paid $49 million for the Upper East Side limestone mansion formerly owned by Penthouse founder Bob Guccione; he spent millions to renovate it, adding a swimming pool, a spa, and a movie theater. Falcone later built his Hamptons home in the tony village of Sagaponack at a cost of what he says was $25 million to $30 million. He also paid $39 million for a villa compound on St Bart’s, where his wife redecorated and renamed its bedrooms after such famous designers as Hermès, Louis Vuitton, and Christian Dior.

I wouldn't have wanted to be the guest stuck in the brown and gold Vuitton bedroom. Or a Hermès room that was one giant silk scarf with a stirrup theme. 

 As is de rigueur for moguls, Falcone also amassed an art collection with works by such artists as Claude Monet, Pablo Picasso, Andy Warhol, Camille Pissarro, and Edgar Degas. Lisa Marie, a former model, still attends New York society’s biggest event — the annual Met Gala — decked out in pricey designer gowns. At one point she was on the board of the New York City Ballet.

Spend often and early! 

“As they say, you never see a U-Haul following a hearse,” he quips.

Whether he's been doing any belt-tightening, Falcone drew a paltry salary of $600K last year, down from $11M+ the prior year. That's certainly a goodly amount, but it doesn't get you to the Met Gala.

Falcone says the problem isn't lack or money, it's lack of liquidity. Looks like he tried to grab a bit of liquidity by selling off art work that was supposed to be a collateral. Smooth move!

I doubt that Falcone will end up in a three-bedroom ranch in the wilds of Minnesota. But it looks like this mighty may well end up fallen. Think Wile E. Coyote running off the edge of the cliff. Don't look down, Phil!