LightSquared plans to provide high-speed [wireless] Internet service throughout the US. But Pentagon officials have raised concerns that the company's proposed network of satellites and land-based cell towers could interfere with sensitive military GPS systems, threaten aviation safety, impede with military rescue operations and hinder cell phone reception.
According to recent media reports, LightSquared CEO Sanjiv Ahuja made a $30,400 contribution to the Democratic Party on the same day that two of his deputies requested a meeting with top technology advisers to President Obama. But there's more to this story, much more:
[The aforementioned] Phil Falcone, the founder of hedge fund Harbinger Capital Partners, is currently under criminal and civil investigations by the Security Exchange Commission and the U.S. Attorney’s Office in Manhattan for allegedly failing to disclose $113 million in personal loans he took from his hedge fund to pay personal taxes. The Wall Street Journal has also reported that investigators are looking into allegations that Mr. Falcone allowed some clients to redeem funds from his hedge fund during the financial crisis of 2008, while preventing others from doing so.And, according to recent media reports, Air Force Gen. William Shelton told lawmakers during a classified briefing last week that the White House tried to pressure him to change his testimony before congress to make it more favorable to Lightsquared.
According to the Wall Street Journal, Falcone and Harbinger scored big gains for investors in 2007, but the fund has since shrunk from $26.5 billion to $9 billion from losses and client withdrawals. As of last November, the fund was off 15% for the year, and investors... had put in requests to withdraw funds.
Also important, investors have expressed increasing concerns over Falcone’s plans to launch the LightSquared venture. The majority of Harbinger’s declining assets are pledged to this venture, which many believe is risky and underfunded...
None of Falcone’s plans would be successful, however, unless the Administration and the FCC intervened on his behalf. Over the past year, a series of unusual decisions, questionable meetings, and procedural anomalies at the FCC and the White House highlight Falcone’s growing influence in the government.
Without going into pages of detail here, the FCC delayed publicly disclosing some of its dealing with Harbinger/LightSquared for weeks or months, and still has not disclosed some of them at all. An April 21, 2010 letter to FCC Chairman Genachowski, from Senators Hutchinson, DeMint, Vitter and Brownback resulted in nothing more than a non-responsive letter from Genachowski on May 10. (Some of that has to do with a Harbinger/SkyTerra merger that is a critical piece of the LightSquared venture.)
Meanwhile, Falcone developed his government influence. According to White House visitor access logs, on September 22, 2009, Falcone and LightSquared CEO Sanjiv Ahuja personally visited the White House and met with the Chief of Staff at the Office of Science and Technology Policy (OSTP). One day later, the Harbinger/SkyTerra merger agreement was signed.
On September 30, 2009, one week after his September 2009 White House visit, Falcone contributed $30,400 to the Democratic Senatorial Campaign Committee, the maximum legal individual contribution limit to a party committee. His wife, Lisa Falcone, contributed an additional $30,000 to the DSCC on the same day. LightSquared’s CEO Sanjiv Ahuja also contributed $30,000 to the DNC in September 2010.
On January 21, 2010, Falcone visited the White House again, this time for an appointment with John Holdren, the Director of the OSTP.
In addition to well-timed political contributions to the DSCC at the height of merger review discussions, Falcone/Harbinger also secured the assistance of a lobbying firm, the Palmetto Group, via Harbinger’s legal counsel, to lobby Congress and the FCC. Steve Glaze, lobbyist with the Palmetto Group, was registered to lobby the FCC directly on mobile satellite services on Falcone’s/Harbinger’s behalf. Steve Glaze is married to Terri Glaze, a senior staffer at the FCC.
On January 12, 2011, the National Telecommunications and Information Authority (housed within the Department of Commerce) sent a letter to FCC Chairman Genachowski, objecting to the waiver. There was also a letter from Danny Price, Director of Spectrum and Communication Policy at the Department of Defense, stating that the FCC should defer action on the waiver request and place the application under a Notice of Prosed Rule-Making (NPRM).
The United States GPS Industry Council (USGPSIC) also raised concerns in a letter. Notable, that letter included serious concerns about interference with E911 and law enforcement GPS applications.
Nonetheless, the FCC, on delegated authority, officially granted LightSquared’s request for a waiver. In granting the waiver, the FCC chose to issue a license modification for LightSquared because of what they term “unique” circumstances, instead of modifying its rules to apply to all providers. That essentially guarantees that Falcone, and only Falcone, receives this special treatment.
We can only speculate whether or not these “unique” circumstances are related to Falcone’s September 30, 2009 meeting with the White House, and subsequent political contributions to the DSCC. But the outcome of the FCC’s action means that other companies will not be able to take advantage of the same loophole.
In addition to the GPS issue, the ramifications of the FCC’s favoritism to Falcone and LightSquared are enormous. Consider other competitive nationwide mobile providers. Take Clearwire, for example. They purchased terrestrial spectrum at auction for substantial sums, and they have invested millions more to build out their 4G network. And now, thanks to the FCC, their competitor LightSquared is given the same terrestrial spectrum for free, and is essentially exempt from requirements to invest and build out a competing network. The message to companies like Clearwire is clear: Companies who play by the rules, create jobs, and invest in building out competing networks are now at risk of seeing their plans entirely upended by the FCC’s arbitrary “unique” circumstances in favor of a competitor who developed the right political influence and who made the right political financial contributions.
Conclusion: With new allegations of White House misconduct popping up each and every day, the congressional Judiciary and Oversight committees would be well-advised to expand their work-force by increasing the number of lawmakers in their respective committees. This would provide much-needed relief to the committees which carry the enormous burden, and responsibility, of probing the endless stream of corruption emanating from the White House.
Of course, an expansion of the Judiciary and Oversight committee workforce would draw fierce opposition from White House officials, who no doubt would cite an argument often used by the GOP, namely that Big Government stinks, and that an expansion of government power, when it pertains to congressional oversight of the White House, is not in the best interest of the US.
Nevertheless, this perpetual stream of corruption is clearly unprecedented in the annals of US Presidential politics.