WHEN: Today, Tuesday, March 1st
WHERE: CNBC's "Squawk Box"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with HC2 Holdings Chairman and CEO Phil Falcone on CNBC's "Squawk Box" (M-F, 6AM-9AM ET) today, Tuesday, March 1st. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000497969.
All references must be sourced to CNBC.
ANDREW ROSS SORKIN: WE ARE NOW MOVING TO AN INTERVIEW. PHIL FALCONE BREAKING HIS SILENCE AND TRYING TO MAKE A COMEBACK. THE SECURITIES AND EXCHANGE COMMISSION CHARGED BILLIONAIRE HEDGE FUND INVESTOR, PHIL FALCONE, YOU MIGHT REMEMBER, WITH SECURITIES FRAUD BACK IN 2012. THOSE CHARGES INCLUDED MISAPPROPRIATION OF CLIENT ASSETS AND MARKET MANIPULATION. THE S.E.C. ALLEGED AT THE TIME THAT PHIL FALCONE HAD USED THOSE FUND ASSETS OF THAT FUND TO PAY HIS TAXES AND CONDUCT AN ILLEGAL SHORT SQUEEZE. FALCONE SETTLED THOUGH WITH THE S.E.C. FOR $18 MILLION AND AGREED TO A BAN FROM THE SECURITIES INDUSTRY FOR FIVE YEARS. HE NOW HAS A NEW COMPANY THOUGH AND AS I SAID HE IS MOUNTING A COMEBACK. HE JOINS US NOW WITH AN EXCLUSIVE INTERVIEW AND HE IS IN WEST PALM BEACH THIS MORNING. GOOD MORNING TO YOU, PHIL.
PHIL FALCONE: MORNING.
SORKIN: THANK YOU FOR JOINING US THIS MORNING. LET'S TALK A LITTLE BIT. WE'LL DO THE HISTORY IN A MOMENT, BUT LET'S TALK ABOUT WHAT YOU'RE DOING NOW. AS I SAID, YOU ARE MOUNTING A COMEBACK, IF YOU WILL, AND YOU DO RUN A PUBLICLY TRADED COMPANY. WHAT IS THAT COMPANY AND WHAT DOES IT DO?
FALCONE: YEAH, IT IS A COMPANY BY THE NAME OF HC2. IT'S A HOLDING COMPANY AND WHAT WE'RE DOING IS THAT, I LIKE TO CONSIDER IT A PERMANENT CAPITAL VEHICLE, WHERE WE ARE OUT ACQUIRING COMPANIES AND REALLY BUILDING AND DOING BOLT-ON ACQUISITIONS OF THE VARIOUS COMPANIES. BUT IT'S A DIVERSIFIED HOLDING COMPANY STRUCTURE, WHERE WE ARE, AGAIN, JUST LOOKING AT TAKING CONTROL OF COMPANIES AND ACQUIRING COMPANIES. IT'S VERY SIMILAR TO WHAT I DID WHEN I RAN HARBINGER GROUP, AND WHEN I BUILT HARBINGER GROUP OVER THE LAST THREE, FOUR, FIVE YEARS.
SORKIN: CURRENT MARKET CAP OF YOUR COMPANY IS $139 MILLION. YOU OWN A NUMBER OF SMALL BUSINESSES AT THE TIME, INCLUDING ONE THAT IS A RESORT AND CASINO IN VIETNAM. WHAT'S THAT?
FALCONE: WELL, THE RESORT AND CASINO IN VIETNAM IS ACTUALLY NOT PART OF THE PUBLIC COMPANY. THE RESORT AND CASINO IS AN ENTITY THAT I GOT INVOLVED IN WHEN I RAN THE FUND. AND IT'S STILL IN THE FUND, WHERE WE OWN ABOUT 85% OF THE ENTITY. IT'S A CASINO, REALLY ONE OF THE ONLY ONE OF ITS KIND IN SOUTH VIETNAM. AND WE HAVE BEEN BUILDING IT. IT'S NOW OPEN. AND ACTUALLY DOING QUITE WELL.
SORKIN: LOCALS, BY THE WAY, JUST ONE FINE POINT ON THE VIETNAM THING, BECAUSE I FOUND IT INTERESTING, LOCALS IN VIETNAM ARE NOT ALLOWED TO GAMBLE. SO HOW DOES THAT WORK?
FALCONE: CORRECT. YOU KNOW, THAT WAS ONE OF THE THINGS THAT WE LOOKED AT WHEN I GOT INVOLVED ABOUT SIX, SEVEN YEARS AGO. WE FULLY EXPECT THAT AND WE ANTICIPATE LOCALS BEING ALLOWED TO GAMBLE AT SOME POINT. AND THAT WAS THE OPPORTUNITY IN AND OF ITSELF, WHERE WE GOT – WE ACTUALLY TOOK CONTROL OF ONE OF THE LICENSES.
SORKIN: PHIL, GIVEN THIS S.E.C. SETTLEMENT THAT YOU MADE WITH THE GOVERNMENT, WHAT CAN YOU AND CAN YOU NOT DO? YOU SEEM TO BE ALLOWED TO RUN A PUBLICLY TRADED INVESTMENT COMPANY, BUT NOT ALLOWED TO INVEST IN THE MARKET.
FALCONE: YEAH, WELL, IT'S NOT ACTUALLY A PUBLICLY TRADED INVESTMENT COMPANY. IT'S A HOLDING COMPANY, KIND OF MODELED AFTER THE LEUCADIA, LOWE'S TYPE OF STRUCTURE. AND I CAN INVEST IN THE MARKETPLACE. AND I THINK IT'S IMPORTANT TO UNDERSTAND THAT THE ALLEGATIONS AT THE TIME WERE SECURITIES FRAUD, BUT I NEVER SETTLED ON SECURITIES FRAUD. I ACTUALLY SETTLED ON NEGLIGENCE, WHICH I THINK IS VERY IMPORTANT. YOU NEED TO UNDERSTAND THE DYNAMIC THERE. WITH THAT BEING SAID, THIS COMPANY IS A HOLDING COMPANY STRUCTURE. I CAN INVEST IN THE MARKETPLACE. ONE OF THE THINGS THAT I CAN'T DO, AND I'M CURRENTLY STILL RUNNING MY FUND, BUT ONE OF THE THINGS THAT I CAN'T DO, AT THE MOMENT, IS RAISE OUTSIDE CAPITAL IN A REGISTERED INVESTMENT STRUCTURE.
SORKIN: RIGHT. I GATHER THAT AT A CONFERENCE YESTERDAY, YOU SAID THAT YOU THOUGHT YOU WERE UNFAIRLY TARGETED BY THE S.E.C.?
FALCONE: I DON'T THINK I SAID I WAS UNFAIRLY TARGETED. I, YOU KNOW, IT WAS AN UNFORTUNATE CIRCUMSTANCE. YOU KNOW, I THINK THERE'S A LOT OF THINGS THAT PEOPLE DON'T KNOW THAT, UNFORTUNATELY, I CAN'T REALLY DISCUSS. YOU KNOW, IT WAS, I GUESS, A SIGN OF THE TIMES AND A FUNCTION OF THE TIMES, AND IT WAS CLEARLY AN UNFORTUNATE CIRCUMSTANCE, AND I HAD TO PUT THAT BEHIND ME. AND IT WAS IMPORTANT FOR MY CAREER TO PUT THAT BEHIND ME. SO I FEEL LIKE I'VE TAKEN THAT APPROPRIATE STEP.
SORKIN: PHIL, TO THE EXTENT THAT YOU CAN SPEAK TO IT, WHY SHOULD INVESTORS WHO ARE INVESTED IN THIS PUBLIC ENTITY TRUST YOU? GIVEN THE FACT THAT YOU DID SETTLE A CASE THAT EFFECTIVELY SUGGESTED THAT YOU MISAPPROPRIATED FUNDS.
FALCONE: WELL, SEE, THAT'S THE POINT. I DON'T KNOW IF MISAPPROPRIATED FUNDS IS THE RIGHT POINT OR THE RIGHT ISSUE. AND WHEN I TALK ABOUT CERTAIN THINGS THAT PEOPLE DON'T KNOW, UNFORTUNATELY, I CAN'T DISCUSS THAT. BUT, YOU KNOW, MY INTEGRITY HAS ALWAYS BEEN OF UTMOST IMPORTANCE TO ME. AND QUITE FRANKLY, FROM AN INVESTOR PERSPECTIVE, THAT IS ONE OF THE MOST IMPORTANT THINGS. AND YOU KNOW, I THINK THAT WHEN THINKING BACK AND WHEN LOOKING BACK AT IT, THERE WERE A LOT OF THINGS AROUND THE ISSUE THAT, AGAIN, MAY HAVE BEEN A SIGN OF THE TIMES AS TO WHAT WE WERE GOING THROUGH POST THE CRISIS. SO, I DON'T WANT TO SAY I WAS A VICTIM OF CIRCUMSTANCE, AND I CAN'T DENY THE ALLEGATION, BUT IT WAS JUST AN UNFORTUNATE THING. AND AGAIN, I DON'T THINK PEOPLE REALLY KNOW ALL THE DETAILS AROUND IT. AND I CAN'T DISCUSS THE DETAILS, BUT –
SORKIN: PHIL, I ONLY KNOW WHAT'S IN THE CASE, AND THE CASE SUGGESTS THAT YOU USED MONEY FROM THE FUND TO EFFECTIVELY LOAN IT TO YOURSELF, THAT YOU LET CERTAIN INVESTORS OUT OF THE FUND AND OTHER INVESTORS NOT. I MEAN, THAT'S WHAT THE ALLEGATION IS. AND AS I SAID, OR AS YOU JUST SAID, YOU CAN'T DENY THAT PIECE OF IT. AND SO I'M TRYING TO UNDERSTAND, TO THE EXTENT THAT THIS IS A COMEBACK STORY, YOU WANT TO HAVE A COMEBACK AND WANT TO HAVE REDEMPTION, WHAT IT IS YOU CAN SAY AND SPEAK TO THE INVESTOR CLASS WHO MIGHT WANT TO OR THINK ABOUT INVESTING WITH YOU AND WHY THEY SHOULD TRUST YOU?
FALCONE: WELL, YOU KNOW, THE REALITY OF IT IS, AGAIN, I THINK YOU HAVE TO LOOK AT THE DOCUMENTS. YOU HAVE TO LOOK AT MY DOCUMENTS. WHEN YOU TALK ABOUT A MISAPPROPRIATION, I THINK THE IMPORTANT THING TO UNDERSTAND IS THAT THERE WERE CERTAIN THINGS I COULD DO. THERE WERE CERTAIN THINGS I COULDN'T DO. AND AS IT RELATES TO THE CAPITAL IN THE FUND, WHEN PEOPLE TALK ABOUT USING OTHER PEOPLE'S MONEY OR USING THE FUND MONEY, I DON'T THINK THAT'S, YOU KNOW, AGAIN, I CAN'T GO INTO DETAIL AROUND THAT. BUT I DON'T THINK THAT'S THE CASE. I DON'T THINK YOU REALLY UNDERSTAND AND YOU HAVE TO, AGAIN, KIND OF LOOK THROUGH ALL THE DETAILS TO REALLY UNDERSTAND WHAT ACTUALLY HAPPENED. AND UNFORTUNATELY, I CAN'T DO THAT. BUT, MAYBE AT SOME POINT IN MY CAREER I CAN. BUT, YOU KNOW, LISTEN, YOU KNOW, THE S.E.C. WAS IN A DIFFICULT PERIOD COMING OFF THE CRASH AND WHAT WAS HAPPENING IN THE MARKETPLACE AND THERE WAS A LOT OF DIFFERENT THINGS TAKING PLACE IN THE MARKET. AND YOU KNOW, AGAIN, I CAN'T REALLY GO INTO TOO MUCH DETAIL ON IT, BUT –
SORKIN: PHIL, BECAUSE THIS IS THE FIRST TIME WE'VE HAD AN OPPORTUNITY TO SPEAK TO YOU, THOUGH, LET ME ASK YOU THIS. AND LET ME PUT IT IN MAYBE THE SIMPLEST TERMS. IS THERE ANYTHING YOU REGRET ABOUT THE ACTIONS THAT YOU TOOK DURING THAT PERIOD?
FALCONE: LISTEN, IT WAS – I DON'T WANT TO SAY IT WAS A MISTAKE, BUT IT WAS AN UNFORTUNATE CIRCUMSTANCE THAT TOOK PLACE. AND IF I HAD TO DO IT ALL OVER AGAIN, SURE, I WOULD DO THINGS DIFFERENTLY. BUT I DIDN'T COMMIT FRAUD. I DIDN'T VIOLATE SECURITIES LAWS. YOU KNOW, AGAIN, I THINK IT'S IMPORTANT TO UNDERSTAND THAT IT WAS A NEGLIGENCE. I PLEADED TO NEGLIGENCE. AND I THINK THE MEDIA MADE IT OUT, QUITE FRANKLY, A LOT MORE THAN WHAT IT WAS. AND THERE WERE A LOT OF THINGS THAT WERE HAPPENING AT THE TIME. AND EVEN AS IT RELATES TO THE SHORT SQUEEZE THAT I WAS INVOLVED WITH – THAT I WAS INVOLVED IN – THAT IS, AGAIN, THOSE THINGS I CAN'T DISCUSS. I CAN'T DENY THEM. WAS IT UNFORTUNATE? ABSOLUTELY. AND WOULD I DO THINGS DIFFERENTLY? NO QUESTION ABOUT IT. BUT AS I MENTIONED, I THINK MY INTEGRITY IS OF UTMOST IMPORTANCE TO ME AS A PERSON. AND I THINK THAT PEOPLE THAT ACTUALLY KNOW ME AND KNOW THE CIRCUMSTANCES TRUST ME AND, YOU KNOW, I'VE MADE MONEY FOR PEOPLE AND I WILL MAKE MONEY FOR PEOPLE AGAIN.
SORKIN: PHIL FALCONE, FIVE YEARS FROM NOW, WHERE DO YOU WANT TO BE? WHERE DO YOU WANT THIS COMPANY TO BE? DO YOU WANT TO BE DOING THIS? DO YOU WANT TO BE RUNNING A HEDGE FUND?
FALCONE: NO. I'VE PUT THE HEDGE FUND ASPECT BEHIND ME. I THINK THIS IS THE RIGHT VEHICLE FOR HOW I'M THINKING ABOUT – FOR HOW I LIKE TO INVEST. I'VE ALWAYS HAD A MUCH – A VERY A LONGER TERM HORIZON AND A LONG-TERM VIEW. AND IF YOU LOOK AT SOME OF THE THINGS THAT I'VE DONE IN MY CAREER, IT HAS BEEN TYPICALLY MORE CONTROL ASPECT, LONGER TERM VISION. AND WHEN I GOT INVOLVED AND WHEN I BUILT HARBINGER GROUP, TOOK THAT COMPANY FROM $170 MILLION TO WHERE IT IS, $2.5 BILLION TODAY. I MOVED ON TO THIS ONE TO CREATE A SIMILAR TYPE STRUCTURE, ALBEIT, WITH A FEW DIFFERENT NUANCES. SO WHERE I HOPE TO BE IN FIVE YEARS IS BIGGER THAN WHERE HARBINGER GROUP WAS AND MY OBJECTIVE IS TO KEEP GROWING IT AND TO BE METHODICAL ABOUT IT.
SORKIN: RIGHT. PHIL, REAL QUICK, BEFORE YOU GO. I GATHER YOU MADE A COMMENT, I DON'T KNOW IF IT WAS YESTERDAY, ABOUT WHAT YOU DESCRIBED AS THE MEDIOCRITY WITHIN THE INDUSTRY THESE DAYS. AND I WANTED TO UNDERSTAND WHAT YOU MEANT BY THAT.
FALCONE: WELL, I THINK THERE'S A LOT OF PEOPLE – THERE'S SOME THE GREAT – OBVIOUSLY, SOME GREAT INVESTORS OUT IN THE MARKETPLACE. BUT I THINK IT'S, YOU KNOW, THERE'S A LOT OF PEOPLE THAT ARE RUNNING FUNDS RIGHT NOW. AND I THINK THERE'S PROBABLY TOO MANY PEOPLE RUNNING FUNDS RIGHT NOW. AND THAT'S WHAT I MENTIONED ABOUT KIND OF MEDIOCRITY. I'M NOT TARGETING ANYBODY OR NOT SPECIFICALLY POINTING TO ANYBODY, I JUST THINK THE MARKET – THERE'S TOO MANY FUNDS AROUND. AND YOU'LL SEE TIMES LIKE THIS WHERE SOME GET FILTERED OUT AND SOME END UP CLOSING DOWN. AND I THINK THAT'S WHAT YOU'RE GOING TO SEE NOW OVER THE NEXT SIX TO 12 MONTH.
SORKIN: OKAY, FAIR ENOUGH. PHIL, WE APPRECIATE YOU JOINING US THIS MORNING. AND WE HOPE MAYBE WE'LL HAVE AN OPPORTUNITY TO TALK TO YOU IN PERSON RIGHT HERE IN NEW YORK. THANKS AGAIN.
FALCONE: OKAY. THANKS.
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