Falcone bought the stake in 2008, when he was fresh from his mortgage killing and the newspaper's revenue was falling as advertisers migrated to the Internet. In January 2008, he offered a slate of four new directors and urged the company to sell extraneous assets, such as its stake in the Boston Red Sox baseball team, and to use that money to build its online business.

Times Incursion

Two of Falcone's nominees won election to the board: Scott Galloway, founder of Firebrand Partners, a consulting firm that advised Falcone on the purchase, and James Kohlberg, chairman of Kohlberg & Co. and son of Jerome Kohlberg, a founder of private- equity giant KKR & Co.

Falcone hasn't been able to turn around New York Times's slumping stock. Since Galloway and Kohlberg joined the board on April 22, 2008, the company's shares have fallen 60 percent as of Sept. 28, to $7.82. Falcone still owned 9 percent of the Class A shares as of June 30. Kohlberg remains on the board; Galloway left this year.

People who know Falcone say he's a hard-working guy who retains his Midwestern values.

"Phil is a product of his upbringing," Galloway says. "He has good manners. He's not a chair thrower. I've never seen him yell."

When Harbinger was looking for office space a few years ago, Falcone's broker found a prime location on which another, smaller hedge fund had put a deposit. The broker told Harbinger it could certainly outbid them.

'Bad Karma'

"Phil's words were, 'That's bad karma; I don't want to push out a smaller firm,'" Galloway says.

Family is important to Falcone, Galloway says. His twin daughters come to lunch at his office, 10 blocks south of their home, every Friday. Galloway says he once set up a meeting for Falcone with a billionaire investor who was interested in Harbinger. Falcone said he couldn't make the meeting because he had to go see his mother.

Falcone was wide-eyed when he arrived at Harvard in 1980, says hockey teammate Greg Olson, who's now a dentist in Minnetonka, Minn.