"He was a deer in the headlights," Olson says.

After recovering from the initial shock, Falcone made himself something of a campus don. Hockey teammates called him "Fashion Phil" because he cared so much about his clothes, Olson says. He had a blue, three-piece suit that he wore often, and he always wore stylish shoes.

Hockey Intensity

The center on the hockey team, Falcone practiced hard and studied hard.

"He took a lot of ribbing because of his intensity," says teammate Brad Karp, a former energy executive in Santa Fe, New Mexico.

In his freshman year, Falcone won the George Percy award, given to first-year players for enthusiasm and sportsmanship. Harvard went to the NCAA championships in 1983, Falcone's junior year. The team lost to Wisconsin, 6-2.

After graduating with a B.A. in economics, Falcone played hockey for a professional team in Malmo, Sweden, for a year. He quit when he injured his leg. He returned to the U.S. and went to work for investment bank Kidder, Peabody & Co. in New York, where he traded high-yield debt for about five years.

In 1990, Falcone and Edward Garden, a friend from Harvard, pooled their money, got some loans and bought AAB Manufacturing Corp., a struggling Newark, New Jersey-based maker of brushes and combs. Then a drugstore chain that was one of AAB's biggest customers went bankrupt, taking the combmaker's receivables with it.

Going Broke

In congressional testimony on hedge funds' role in the financial crisis, Falcone said he was so broke he couldn't pay his electric bill.