July 13, 2006

FCC member Jonathan Adelstein said the US government should prohibit Wall Street money manager Mario Gabelli from participating in the Aug. 9 advanced wireless services auction as part of a fraud settlement with the Justice Department.

“I think the Justice Department as part of the settlement should bar Mario Gabelli and his companies from participating in the auctions,” Adelstein said in phone interview with RCR Wireless News, after making similar remarks at an event sponsored by the Minority Media and Telecommunications Council.

MMTC is one of three parties challenging FCC small bidding—or designated entity—rule changes at the 3rd U.S. Circuit Court of Appeals in Philadelphia.

MMTC, Council Tree Communications Inc. and Bethel Native Corp. had urged the commission to adopt its original plan to keep major mobile phone carriers and possibly other large telecom firms from accessing spectrum at discounts by partnering with DEs.

Instead, the agency took a different approach to closing what Adelstein and fellow Commissioner Michael Copps—both Democrats on the GOP-led FCC—regard as a huge loophole that they argue allows national wireless carriers to benefit from a rule designed for small companies.

Adelstein, a sharp critic of FCC Chairman Kevin Martin’s handling of DE reform, said in the interview that Gabelli and his telecom unit—Lynch Interactive Corp.—also should be disqualified for life from the auction program that awards bidding credits of up to 25 percent to small businesses.

It may be too late, however.

Gabelli and Lynch filed short-form AWS applications, and it appears the settlement—while forcing Lynch to cough up $34 million—does not impair his ability to bid on any of the 1,122 wireless licenses in the 1710-1755 MHz and 2110-2155 MHz bands.

The final settlement is expected to be filed this week at the U.S. District Court in Manhattan.

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Charles Dolan, chief executive officer of Lynch, did not return a call for comment.

The 2001 suit, filed under the False Claims Act, alleged Gabelli defrauded the U.S. government of at least $85 million by hiding Lynch's control of DEs in spectrum auctions during the 1990s.

Some discounted DE licenses in which Lynch was a partner subsequently sold for more than $200 million. Gabelli has denied any wrongdoing.

“Lynch Interactive is pleased to have reached a tentative agreement with the government, and now the other defendants, so that the company can focus on its on-going operational dynamics to better serve the communities and help them to compete in the global broadband marketplace.

The company believes the settlement will maintain its integrity and reputation so that it can operate on all fronts in this ever changing world,” Lynch said in a statement.

Source: RCR News