Billionaire Philip Falcone was banned by New York state’s top financial watchdog from being an officer or director of Fidelity & Guaranty Life for seven years for using his hedge funds’ money for his personal taxes.

Falcone, 51, is also barred from “direct or indirect control over the management, policies, operations” and investment funds of Fidelity’s New York unit, the state’s Department of Financial Services said today in a statement. The ban also applies to employees of his hedge fund, Harbinger Capital Partners LLC, which controls the insurance company.

The ban stems from Falcone’s accord in August with the U.S. Securities and Exchange Commission, which had sued him over the same allegations and banned him from the securities industry for five years. In that case, Falcone admitted to improperly borrowing $113.2 million from the fund and giving preferential treatment to some clients when returning their money.

“It is vital to ensure that those who operate insurance companies will always put retirees and policyholders first and act with the utmost integrity,” DFS Superintendent Benjamin Lawsky, who regulates banks and insurers operating in New York, said in the statement.

Falcone, who became a billionaire by betting against the U.S. housing market in 2006, was approached by Lawsky’s office following his settlement with the SEC, Matthew Anderson, a spokesman for the New York Department of Financial Services, said in a phone interview today.

Seven Years

Following negotiations, Falcone, Harbinger and Baltimore- based Fidelity all agreed to the seven-year ban against Falcone and the deal’s reach beyond New York, where the regulator has authority, Anderson said.

The New York ban comes as Fidelity is seeking a valuation of at least $1 billion in its initial public offering, according to two people involved in the planning. Harbinger Group Inc. bought Fidelity & Guaranty, the U.S. life and annuity unit of London-based Old Mutual Plc, for $350 million in 2011.

Falcone’s hedge funds last month sold $158 million of Harbinger Group shares, a stake of about 13 percent, to Leucadia National Corp. as the money manager meets redemption requests after the SEC settlement.

Eric Goldstein, a lawyer representing Harbinger Capital, didn’t immediately return a call for comment on the DFS ban.