Let the sun shine in…
After I blogged last week about Barack Obama’s burgeoning LightSquared scandal, I received a miffed e-mail from billionaire hedge fund manager/Obama donor/LightSquared principal backer Philip Falcone under the subject line “Tip.” Falcone defended the Obama administration and noted that the predecessor to LightSquared, called Skyterra, had benefited from some previous regulatory approvals under the Bush administration. (Sound familiar? It’s the same “Blame Bush” defense the White House and its allies are using to try and deflect the Solyndra debacle.)
Falcone then fumed at me: “I really wish someone would take 5 freaking minutes to do some diligence and get the chronology straight! I’d be glad to point you in the right direction if you so choose. You may even find some dirt on AT&T, the GPS guys and they (sic) money they are spending on this campaign. Do you know that your tax dollar goes to build satellites that the GPS manufacturers use, for free?? Billions….Billions…..Billions…And a few of these companies are foreign companies….that do not pay taxes. I really truly wish someone would spend some time to get the facts straight.”
While Falcone and his P.R. team take to the airwaves, I took more than “5 freaking minutes to do some diligence” and did a little more digging. My syndicated column below goes over the latest developments and basic facts since The Daily Beat’s Eli Lake first reported Gen. Shelton’s bombshell disclosures about the White House’s testimony-meddling.
But there’s much more.
As the House prepares to launch official investigations of both Solyndra and LightSquared, investigators need to look closely at exactly how the Obama FCC’s unusual January 2011 waiver for LightSquared promised the politically-connected company a stunning corporate windfall. The waiver gave the company a green light to use its initial satellite bandwidth license for “exclusive terrestrial purposes.” As the Telecom, Media and Finance Associates, Inc. blog explains, this meant that “the spectrum rights would be considered (and valued) as equivalent to terrestrial spectrum, allowing LightSquared to raise additional funds to build out its network. In fact that is exactly what LightSquared then proceeded to do, by raising $586M, secured against its spectrum assets, in February 2011.”
By the company’s own internal estimates and comparisons with other satellite spectrum transactions, the January 2011 waiver boosted the value of LightSquared’s spectrum assets by $10 billion more than two similarly situated mobile satellite service providers that had gone bankrupt. TMF Associates notes:
Once this $10B windfall is more widely recognized, I think it is going to represent an enormous political problem for both LightSquared and the FCC Chairman during the upcoming Congressional hearings, making Solyndra’s $535M loan look like small beer [emphasis added]. After all in July 2010 current FCC Commissioner Copps noted in conjunction with the MSS NPRM/NOI that he “appreciate[d] the willingness of my colleagues to raise questions regarding the need for any mechanisms—such as spectrum fees—to compensate the American people for the terrestrial use of the public spectrum resource”, which is exactly why January’s action (which was not even brought before the full Commission) was such “an unprecedented and surprising development”.
A few more tidbits:
*Soros Fund Management — surprise, surprise — is a “signficant investor” in Falcone’s enterprise.
*Debunking of LightSquared’s spin that it “has never taken one dollar in taxpayer money:”
…[A]pparently forgetting Mr Carlisle’s testimony to Congress that LightSquared has received over $2M from the FBI for providing satellite services and equipment in the current fiscal year, not to mention its own estimate that the January 2011 FCC waiver was worth over $10 billion in incremental spectrum value to the company. And did he really just say that they will only be investing $8B rather than the $14B number they have used previously?
The FCC Chairman’s refusal to attend the hearing comes in the wake of allegations that the White House pressured Gen. Shelton to change his testimony to the Committee, and while Sen. Grassley is still pursuing the FCC Chairman for details of FCC communications with and about LightSquared in the run up to approval of the January 2011 waiver. My guess is that there must have been some reason for LightSquared to submit its waiver request on the Thursday before Thanksgiving and it would be reasonable to assume that they must therefore have been told by the FCC that the application would be placed immediately on public notice with an accelerated (10 day) comment period over the holiday, in the hope that no-one would notice. If that was the case then it would be quite surprising if there was no email evidence of such communications.
Unfortunately for the White House, the over-worn “Blame Bush” card does not explain the Obama FCC’s actions, the Obama FCC’s refusal to attend the hearing, or President Obama’s own eyebrow-raising financial entanglements (more on that below) with LightSquared’s predecessor and his ties to several of the shady investors and promoters of the racket.
LightSquared: Obama’s Dangerous Broadband Boondoggle
by Michelle Malkin
If you thought the half-billion-dollar, stimulus-funded Solyndra solar company bust was a taxpayer nightmare, just wait. If you thought the botched Fast and Furious border gun-smuggling surveillance operation was a national security nightmare, hold on. Right on the heels of those two blood-boilers comes yet another alleged pay-for-play racket from the most ethical administration ever.
Welcome to LightSquared. It’s a toxic mix of venture socialism (to borrow GOP Sen. Jim DeMint’s apt phrase), campaign finance influence-peddling and perilous corner-cutting all rolled into one.
The company is building “a state-of-the-art open wireless broadband network.” Competition in the industry is a good thing, of course. But military, government and civilian aviation experts have long objected to LightSquared’s potential to interfere with the Global Positioning System (GPS) satellite network. As the government’s own Positioning, Navigation and Timing agency explained:
“The GPS community is concerned because testing has shown that LightSquared’s ground-based transmissions overpower the relatively weak GPS signal from space. Although LightSquared will operate in its own radio band, that band is so close to the GPS signals that most GPS devices pick up the stronger LightSquared signal and become overloaded or jammed.”
Two high-ranking witnesses — Air Force Space Command four-star Gen. William Shelton and National Coordination Office for Space-Based Positioning, Navigation and Timing Director Anthony Russo — have now blown the whistle on how the White House pressured them to alter their congressional testimony and play down concerns about LightSquared’s threat to military communications. According to Eli Lake of The Daily Beast, both officials were urged to express confidence in the company and endorse its promise to address any technical concerns “within 90 days.”
Gen. Shelton had noted earlier this year: “Within three to five miles on the ground and within 12 miles in the air, GPS is jammed by (LightSquared’s) towers. … If we allow that system to be fielded and it does indeed jam GPS, think about the impact. We’re hopeful we can find a solution, but physics being physics, we don’t see a solution right now.”
Despite industry-wide protests, the firm somehow received fast-track approval for a special FCC waiver that grants LightSquared the right to use wireless spectrum to build out a national 4G wireless network on the cheap. Ken Boehm, of the conservative watchdog National Legal and Policy Center (NLPC) in Washington, D.C., summed up the deal earlier this year: “LightSquared will get the spectrum for a song, while its competitors (e.g., AT&T and Verizon) have to spend billions.”
The current “fix” LightSquared proposes to address the interference problems is a costly, conceptual pipe dream that could require massive retrofitting of millions of handheld GPS devices. GPS expert Eric Gakstatter scoffs: “I’ve been pretty open-minded about LightSquared proposing a solution, but this really insults our intelligence. (A)s we’ve seen previously with LightSquared, it’s not about finding a practical solution for the GPS user community; it’s all about selling an idea to the FCC. The problem is that the FCC doesn’t have to live with LightSquared’s half-baked ‘solution’; we do.”
So, what’s greasing LightSquared’s skids? Hint: It used to be known as “Skyterra.” In 2005, Obama put $50,000 into the speculative firm — raising eyebrows even among his water-carriers at The New York Times. The paper noted that Skyterra’s principal backers at the time of the investment included four Obama “friends and donors who had raised more than $150,000 for his political committees.”
One of those pals who urged him to buy stock in Skyterra was George Haywood, a major Skyterra investor and campaign donor who chipped in nearly $50,000 to Obama’s campaigns and to his political action committee along with his wife.
Coincidentally, Obama bought his Skyterra stock the very same day the FCC “ruled in favor of the company’s effort to create a nationwide wireless network by combining satellites and land-based communications systems.” One industry expert tells me it strains credulity to believe the timing wasn’t dictated by inside information. Indeed, the Times reported that immediately after that morning ruling, “Tejas Securities, a regional brokerage in Texas that handled investment banking for Skyterra, issued a research report speculating that Skyterra stock could triple in value.”
Coincidentally, Tejas and its chairman, John J. Gorman, were also major backers of Obama — flying him in a private plane for political rallies and pitching in more than $150,000 for his campaign coffers since 2004. Obama sold his stock at a loss in November 2005 — just as Skyterra was locked in a messy proxy fight over a failed roll-up — but his political relationship with the company was cemented.
In 2009, shady billionaire hedge-fund manager Philip Falcone — whose firm Harbinger Capital Partners is reportedly under investigation by the Securities and Exchange Commission for market manipulation abuses — acquired Skyterra.
Coincidentally, Falcone, his wife and LightSquared CEO Sanjiv Ahuja have contributed nearly $100,000 between them to the Democratic Party during critical White House meeting periods and negotiations over LightSquared’s regulatory fate.
It’s all just one strange quirk of timing, Team Obama shrugs. Except, as we all should know by now: There are no coincidences in Chicago on the Potomac. Just an endless avalanche of quids, quos and taxpayer woes.
Shady birds of a feather flock together. Here’s more background on Obama’s broadband boondoggle pals.
Via Business Week 2005, here’s what was going down with key Skyterra/LightSquared investors after Obama sold his stock. According to public SEC filings, Motient Corporation in September 2005 “entered into a non-binding letter of intent with Skyterra Communications Inc. and TMI Communications and Company (and others) to consolidate ownership” of two mobile satellite service providers — MSV and TerreStar — within Motient. Motient’s largest shareholder at the time was Dallas-based hedge fund Highland Capital Management. Shady pandemonium ensued:
In August, Highland sued Motient’s officers and directors in Chancery Court of Delaware, claiming the defendants tried to line their pockets with Motient’s cash by paying exorbitant fees to firms in which they held interests. The suit focuses especially on Motient chairman Steven G. Singer, his brother and convicted felon Gary A. Singer, and former Motient director Jared E. Abbruzzese.
According to the complaint, Motient hired Abbruzzese’s Albany (NY)-based consultancy Communication Technology Advisors (CTA) in May 2002 to provide financial advice while Abbruzzese was still a director at Motient. At the time, two other CTA employees, Peter D. Aquino and Gerald S. Kittner, were also Motient directors. Since then, CTA has functioned as Motient’s de facto executive management and has received over $3 million in fees and tens of millions of dollars worth of warrants to buy Motient stock, Highland’s complaint says.
The complaint further claims that Abbruzzese and CTA in 2004 pressured Motient’s board to hire a small Austin (Tex.)-based investment bank, Tejas Inc., to raise money for Motient. However, Abbruzzese allegedly failed to disclose that he owned options to buy 100,000 shares of Tejas. As a result of fees and warrants paid by Motient, Tejas’ annual profit increased over 2,600%, and the Tejas shares underlying Abbruzzese’s options appreciated 900% in one year. In March 2005, Motient appointed Barry A. Williamson to its board, a Tejas director who owns over 51,000 Tejas shares. In May 2005, Tejas announced it would acquire CTA for $65 million. Abbruzzese was appointed vice chairman of Tejas and granted a generous employment agreement and stock-option package.
Abbruzzese’s alleged conflicts run deeper. In fiscal year 2004, Motient lost $72 million on revenues of $36.9 million. What, then, accounts for its $1.3 billion market cap? The company has a 40% stake in Mobile Satellite Ventures (MSV), a Reston (Va.)-based provider of mobile satellite communications that owns valuable spectrum licenses. MSV is a limited partnership, and its general partner is Motient Satellite Ventures GP, Inc., whose managers are Abbruzzese and Kittner of CTA. “Motient’s purchases of MSV units in 2004 at prices that reflected ever increasing valuations of MSV enriched Kittner, Abbruzzese and CTA through their ownership of MSV units,” Highland’s complaint says.
…Hovering in the background of this power struggle is Steven Singer’s brother, Gary Singer, who in the mid-1990s spent nearly two years in federal prison for fraud, money laundering, and racketeering as part of a junk-bond insider trading scheme while he was co-chairman and CEO at Cooper Companies, Inc., a healthcare products maker in Pleasanton (Calif.). At the time of the crime, Steven Singer and a third brother, Brad Singer, were also executives at Cooper and were later sued on civil charges related to the trading scheme.
The SEC has permanently barred Gary Singer from acting as an officer or director of any public company. Nevertheless, Highland’s complaint says that he “shares an office with Steven Singer, has participated in many Motient board meetings and conference calls, and even acted in a managerial role on behalf of the company.” Gary Singer has allegedly pressured Motient’s board for compensation and owns warrants to acquire Motient shares.
Here’s a summary of the “conflicts of interests and board self-dealings” related to Terrestar.
Note also from the SEC documents that the interference issues that are at the heart of the regulatory battle now were raised at least six years ago. LightSquared continues to downplay those problems with pie-in-the-sky fixes.
House GOP investigators have their work cut out for them.
The latest on their quest for documents:
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House Republicans asked for records of contacts between the White House and Philip Falcone, citing concerns about possible political pressure on U.S. agencies over the billionaire’s proposed LightSquared wireless venture.
LightSquared is seeking to allay fears its planned $14 billion network may disrupt military and civilian uses of the global-positioning system. The company needs clearance from the Federal Communications Commission to proceed. The request yesterday from House Republicans adds political static to a debate that has centered on radio interference.
Some U.S. officials have been reluctant to testify on GPS interference and agencies haven’t provided information, Representative Ralph Hall, of Texas, chairman of the House Committee on Science, Space and Technology, wrote in a letter yesterday. That “does nothing to promote the case for LightSquared, nor does it put our minds at ease about the possibility that this administration may be providing special favors to high-level financial donors,” Hall wrote.
The Obama administration should turn over “all records” of contacts by Falcone, LightSquared and his Harbinger Capital Partners hedge fund, according to the letter. Six other Republicans on the panel signed the letter, which was distributed by e-mail.
Events surrounding solar-panel maker Solyndra LLC, which failed after receiving U.S. loan guarantees, “further emphasize our concern about a pattern by this administration to grant preferential treatment toward donors,” Hall and his colleagues wrote. “As with Solyndra, the lack of scrutiny of the LightSquared project is disturbing.”
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