By Britt Erica Tunick
As soon as news broke of a lawsuit alleging that Harbinger Capital Partners' January 2007 acquisition of Applica succeeded, at least in part, because of its receipt of "nonpublic information" about a rival bid, Harbinger began damage control. Within hours, it sent a letter to investors insisting that claims in the suit were "wholly unsubstantiated" and that the firm could explain its conduct regarding the acquisition.The $8 billion Harbinger has since taken pains to remind the public that the firm has not been accused of insider trading, saying that it has received no inquiries from the Securities and Exchange Commission regarding the allegations by NACCO Industries, a holding company whose subsidiaries include small appliance housewares. The facts of thecase notwithstanding, the Harbinger flap is a window into the hysteria that has gripped the hedge fund industry—both managers and investors—ever since the first insider trading case against...
