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April 18 (Reuters) - Harbert Management Corporation and its top executives agreed to pay $40 million to settle with New York over allegations that it failed to pay state taxes on performance income for several years, according to the New York attorney general.
Alabama-based Harbert Management was the fund sponsor for Harbinger Capital Partners, a $26 billion hedge fund based in New York, New York Attorney General Eric Schneiderman said in a statement.
Schneiderman said Harbert hired Philip Falcone as its primary decision maker for the Harbinger Capital Partners Master Fund Ltd hedge fund.
Falcone and others on the investment team operated out of Manhattan. When businesses operate in and out of New York, they must allocate the income they derive from New York for tax purposes.
The accord resolves claims against Harbert and Alabama-based members of Harbinger Capital Partners Offshore Manager LLC.
Schneiderman said it was the largest tax-related recovery by the New York attorney general's office, stemming from a 2010 change in the state's False Claims Act to cover tax claims. (Reporting by Karen Freifeld)