Documents: LightSquared shaping up as the FCC’s Solyndra

Matthew Boyle Investigative Reporter
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Documents and copies of communications obtained by The Daily Caller indicate that the Federal Communications Commission propped up broadband company LightSquared with favorable regulatory decisions and other special treatment, while driving its competition out of business.

In August 2008, Wall Street hedge fund Harbinger Capital Partners, owned by longtime Democratic political donor Philip Falcone, sought to buy a majority stake in the satellite company SkyTerra — the company that would later become LightSquared. On June 27 of that year, just before Falcone’s Harbinger Capital sought FCC approval for that purchase, Falcone donated $28,500 to the Democratic Senatorial Campaign Committee. But on Sept. 3, 2008, $20,000 of that donation was returned for an unknown reason.

The donation was unusual for Falcone: He had donated to few Democrats and Republicans, including to George W. Bush’s 2004 presidential campaign. But Falcone’s DSCC contribution was the first in what would become a pattern of major Democratic donations from people associated with LightSquared in the coming months and years.

Before Barack Obama became president, he was personally an investor in SkyTerra. Former Harbinger Capital Partners partner Howard Kagan, who left the firm in August 2008, donated $50,000 to Obama’s inaugural committee on Jan. 20, 2009, according to the Center for Responsive Politics.

At the time Falcone, the owner of Harbinger, was still looking for the FCC’s sign-off on his hedge fund’s desire to purchase a majority stake in SkyTerra. The companies began to seek government approval during the George W. Bush administration, but the deal’s pace accelerated after President Obama’s inauguration.

According to White House visitor logs, Obama’s new FCC chairman, Julius Genachowski, a classmate of the president’s from Harvard Law School, met with White House Personnel Director Don Gips on Feb. 18, 2009. Gips’ personal financial disclosure forms show he had between $250,000 and $500,000 of his personal finances invested in SkyTerra via stock options. Gips bundled at least $500,000 in donations to Obama’s 2008 election campaign, and served on the advisory board of Obama’s White House transition team.

It’s unclear what specifically Gips and Genachowski were discussing at that White House meeting; but shortly after that meeting SkyTerra named two members of Obama’s White House transition team to senior leadership positions at the company. On March 9, 2009, SkyTerra hired Gary Epstein, an FCC political appointee for the first few months of the Obama administration and a member of Obama’s transition team, as its executive vice president. On May 11, 2009, SkyTerra named Jeff Carlisle, another Obama transition team member, to serve as its vice president of regulatory affairs.

Not too long after those Obama-tied hires, lawyers for Falcone’s Harbinger fired off an email that may suggest FCC coordination to approve the sale of SkyTerra to Harbinger outside of what is procedurally acceptable. In an email titled “we’re signed off with Team Telecom,” Henry Goldberg of Harbinger’s law firm, Goldberg, Godles, Weiner & Wright, wrote to FCC International Bureau Chief Howard Griboff on July 24, 2009.

“We’ll file the final letter early next week,” Goldberg wrote to Griboff, copying his law partner Joseph Godles.

According to an FCC order filed in March 2010, that FCC International Bureau approval didn’t really happen until a month later, on Aug. 24, 2009. Harbinger’s lawyers seemed to know a month ahead of time that the FCC would approve their proposal.

On the same day Goldberg sent that email to Griboff — July 24, 2009 — SkyTerra asked the FCC to allow it to delay the launch of a new satellite because there was a “potential delay in [its] delivery.” The FCC approved the request, but later denied a similar one for SkyTerra competitor GlobalStar based on “extenuating circumstances” in 2010. This appeared to be one in a long line of instances in which the FCC favored SkyTerra, the future LightSquared, over GlobalStar.

On Sept. 22, 2009, according to White House visitor logs, Obama’s White House Science and Technology Policy chief of staff Jim Kohlenberger met with Falcone, Goldberg and Sanjiv Ahuja, who would later become LightSquared’s CEO. At the time, Ahuja was leading the broadband company Augere, a position he continues to hold. Augere is aimed at providing high-speed Internet service to underserved communities worldwide.

The very next day, SkyTerra and Harbinger signed their merger agreement, according to Securities and Exchange Commission documents.

One week later, Falcone and his wife each donated the maximum legally allowed — $30,400 each — to the Democratic Senatorial Campaign Committee.

Then, on Oct. 23, 2009, SkyTerra filed a document with the FCC arguing that the agency should allow for Ancillary Terrestrial Component waivers to “make it easier for satellite operators to team with strategic partners and attract investment in this area.” SkyTerra was advocating that such waivers should be available industry-wide.

Three days later, according to documents The Daily Caller has obtained, FCC International Bureau Chief Mindel de la Torre invited the FCC’s Satellite Division chief, Ben Nelson, who he said had “been dealing with these [Skyterra] guys for a while,” to a meeting with “Priya [Aiyar] and the Skyterra gang.” Aiyar was Genachowski’s legal adviser.

That meeting occurred on Nov. 2, 2009. Then, on Nov. 5, 2009, Griboff from the FCC’s International Bureau met with Goldberg, from Harbinger’s law firm.

Similar meetings continued through the end of 2009 and into early 2010. One notable meeting occurred at the White House on Jan. 21, 2010, between Falcone, Goldberg and Obama’s science adviser, Kohlenberger.

Another meeting was a private, confidential presentation senior SkyTerra executives Carlisle, Epstein and Alex Good — the CEO — made to senior FCC staffers on March 12, 2010. More secretive meetings took place throughout early 2010 as well.

On March 22, 2010, SkyTerra’s shareholders approved the merger with Falcone’s Harbinger. Four days later, on March 26, 2010, FCC staffers approved the merger. Commissioners never got the opportunity to vote on the merger, a move that is uncommon for such a large-scale deal with far-reaching implications in the marketplace and in the federal wireless policy realm. Usually, with a decision this important, the FCC would elevate it from the bureaucratic staff level to the full Commission for approval.

Three days later, Epstein acquired several hundred thousand shares of SkyTerra stock, according to SEC filings. On April 5, 2010, Gips, a top Obama aide who later became the U.S. ambassador to South Africa, cashed in his stock options for about a half-million dollars.

One condition on the FCC’s final approval of the deal was that Harbinger’s new post-merger outfit — LightSquared, formerly SkyTerra — would not be allowed to provide spectrum to Verizon or AT&T, the nation’s two largest wireless carriers, without prior FCC approval. That condition was part of a confidential agreement Harbinger’s lawyers made with the FCC in a Feb. 26, 2010 letter. The confidential letter wasn’t made public until after the FCC’s bureaucrats approved Harbinger’s SkyTerra purchase.

On April 12, 2010, just one week after Gips cashed in his personal stock, the Public Interest Spectrum Coalition — a left-wing group comprised of the New America Foundation, Free Press, Media Access Project and Public Knowledge — filed comments with the FCC opposing efforts to reconsider part of the agency’s decision to allow the Harbinger–SkyTerra merger. That coalition wanted to preserve the FCC’s requirement that LightSquared would not provide spectrum to AT&T and Verizon without prior FCC approval.

Left-wing billionaire George Soros is reported to have $200 million invested in Harbinger. His Open Society Institute has donated more than $1 million to the four groups that comprise the Public Interest Spectrum Coalition.

Shortly after the Soros-funded groups began applying pressure to the FCC, on April 21, 2010 Republican Sens. Jim DeMint, Sam Brownback, David Vitter and Kay Bailey Hutchison wrote to FCC Chairman Genachowski raising questions of their own. The senators were particularly concerned about the condition in the deal that forced LightSquared to deny AT&T and Verizon spectrum without prior FCC approval. The FCC, they said, hadn’t involved or notified third parties that would be directly affected by the conditions of the deal. They were also concerned that the FCC had concluded the deal at the bureaucratic staff level, without involving a vote by the commissioners.

Genachowski didn’t respond until May 10, and answered none of the GOP senators’ specific concerns in his reply.

On the day before the Republican senators wrote Genachowski, representatives from the Soros-funded Public Interest Spectrum Coalition met with FCC Commissioner Michael Copps to reiterate their opposition to allowing LightSquared to sell spectrum to Verizon and AT&T. The group followed up with an official letter to the FCC on the matter the next day, April 21, 2010.

But in another indication of the FCC’s interest in helping Falcone and his allies at the expense of other stakeholders, the FCC handled the public disclosure of concerns from those on one side of the debate differently from those on the other side.

Though those GOP senators had sent their letter to Genachowski on April 21, 2010, and Genachowski had responded on May 10, 2010, the letter and the FCC chairman’s responses were not published in the FCC’s electronic comment filing system until June 1, 2010. In its electronic records database, the FCC also says it didn’t receive the GOP senators’ letter until May 24, 2010, two weeks after Genachowski had already responded to them.

The letter and the FCC chairman’s response were, however, posted on the FCC’s Office of Legislative Affairs website on May 20.

But the letter from the Soros-funded groups, which was sent to the FCC on the same day as the GOP senators’ letter, was posted in the official electronic records database for public viewing almost immediately — on April 21, 2010, the same day it was sent.

AT&T and Verizon, shocked by the deal, sent scathing comments via their attorneys, questioning the reasoning behind the FCC’s decision.

“Although it is impossible to know what motivated the Commission’s insistence on merger conditions penalizing AT&T and Verizon — since neither the Bureau Order nor any public filing in the proceeding even addresses the issue — there is no possible justification for these conditions,” AT&T’s attorneys wrote, asking the FCC to reconsider the deal’s conditions.

While there is no clear evidence pointing to exactly why the FCC penalized Verizon and AT&T, the publicly stated goals of those Soros-funded organizations that supported the move may be a clue. They believe wireless spectrum “belongs to the public,” and should be subject to as little corporate influence as possible. Their goal is to create a community-oriented, taxpayer-subsidized and highly regulated broadband system, essentially making Internet access a public utility.

The LightSquared plan appears to fit the bill of what Soros’ allies wanted. And after the plan was underway, Goldberg — one of Harbinger’s lawyers — emailed the contact he and Falcone met with inside Obama’s White House just a few months earlier.

“It’s happening,” Goldberg emailed Kohlenberger on July 20, 2010. “Thanks for your help and encouragement. As we bolt together the network, we’ll come in with details.”

“Congrats,” Kohlenberger replied. “Very exciting.”

This article was updated after publication to reflect that a 1999 donation by Philip Falcone to George W. Bush’s presidential campaign may have been from another individual with the same name, not the Philip Falcone who is among the subjects of this story. Also, the Center for Responsive Politics data The Daily Caller cited indicated that former Harbinger Capital partner Howard Kagan was still employed at the hedge fund when he made his $50,000 donation to Obama’s inaugural committee. This is not the case.

A further update was made to clarify minor points including the sequence of events related to the posting of documents in the FCC’s publicly available electronic comment filing system. 

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