This is bigger than Enron. It’s bigger than Worldcom. Only the victims this time are you and me.
You may (or may not) recall that last month, the FCC announced rules for its upcoming spectrum auctions that took a dim view of big operators "cooperating" with small bidders.
Turns out they weren’t blowing smoke. There was a fire. A big one.
Bruce Kushnick of TeleTruth has uncovered $8 billion in auction fraud (PDF warning), in which the big players created phony "entrepreneurial" bidders who won spectrum and then handed it back.
This is fraud on a grand scale. It’s classic, and blatant. It is breathtaking in its gall, mafia-like. Russian mafia-like.
TeleTruth has learned that all four of the country’s major cellular operators — Cingular, Verizon, Sprint and T-Mobile — set up phony "entrepreneurial" companies to bid as small businesses and get spectrum at discount.
The purpose of the entrepreneurial cut-out was to spur competition. Through this fraud they prevented the competition from coming about.
TeleTruth has found, for instance, that a company called Edge Mobile was actually created by Cingular, and Vista Mobile by Verizon. Both bid as "Designated Entities" — "very small business" groups which were to compete only against one another for spectrum. Both had the highest bids in service territories controlled by their parent, and then passed the spectrum along.
Fraud does not get much more blatant than this.
Two FCC commissioners — Michael Copps and Jonathan Adelstein — actually spoke against this recently. Unfortunately they are outvoted. The FCC is approving fraud in its own auction, on behalf of an oligopoly. Here is what Copps said:
"News reports indicate that, in prior auctions, entities with deep
pockets
helped themselves to discounts they were never meant to enjoy.
This unacceptable behavior threatens the integrity of our auctions and,
worse, it cheats consumers. It costs taxpayers millions of dollars in
foregone revenue. It also means that spectrum goes to those most willing and
able to manipulate the rules of the game, rather than to the entities
Congress actually intended to benefit."
Again, the government has refused to do anything about this, like take back the spectrum (or let it go out unlicensed, which would really create competition and growth).
After the jump is a list of these front companies, and who they were working for, created by TeleTruth:
- Alaska Native Wireless, L.L.C. (AT&T
Wireless, now owned by Cingular)- Salmon PCS, LLC (Cingular)
- Edge Mobile
(Cingular)- ABC Wireless, L.L.C. (AT&T Wireless, now owned by Cingular)
- Vista PCS (Verizon Wireless),
- Cook Inlet/VS GSM VII
PCS (T-Mobile)- SVC BidCo, L.P (Sprint)
- Wirefree Partners III
(Sprint)
TeleTruth has filed its complaint with the Federal Communications Commission (FCC),
the Department of Justice (DOJ), the Securities and Exchange Commission
(SEC), and various committees in Congress.
Once this case goes forward, I expect to see some major cellular carrier executives in jail. The theft — of spectrum, of money, of competition — is bigger than what Enron committed.
And if the cellular carriers’ executives think they are going to get away with this indefinitely, I think they have another think coming.
Please, this is not news. This was all done completely above board with the FCC’s full approval. Was it wrong? Of course it was. It was not criminal though and nobody is going to jail for it.
Another interesting story is how Cingular and AT&T Wireless coluded on spectrum issues years before their merger. Now, that is more likely criminal. That sort of thing happens all the time in the incestuous world of telecom.
Please, this is not news. This was all done completely above board with the FCC’s full approval. Was it wrong? Of course it was. It was not criminal though and nobody is going to jail for it.
Another interesting story is how Cingular and AT&T Wireless coluded on spectrum issues years before their merger. Now, that is more likely criminal. That sort of thing happens all the time in the incestuous world of telecom.
I disagree. The recent Mario Gabelli $130 million settlement is an indication the fraud is genuine and potentially criminal. First, there are many more monied investors and businesses using front companies to qualify for designated entity status and winning auctions, besides Gabelli and the ones listed above. It is rampant and the FCC knows it. Basically, like in Auction 35 for C & F blocks PCS, the shams are all over the place. The Department of Justice did join the suit of Gabelli at the last minute and claimed a victory for the taxpayer and citizen, but this was smoke and mirrors because it was covering for the FCC. The FCC had turned a blind eye to its awareness of the fraud in the auctions. Do not ignore that submitting the application forms for an auction with false information is potentially criminal. Remember how they got Al Capone. The greater picture is, however, not that Gabelli and all the prolific number of sham entities got spectrum at a discount and flipped it for a great profit, but that the FCC turned a blind eye. Little press has appeared over the Gabelli lawsuit. Less still about FCC complicity. The FCC was essentially using these people like Gabelli to do its bidding for them like as shill bidders to raise the final bid price of the spectrum. So Gabelli got off the criminal hook with just a settlement because he pointed the finger back at the FCC and said if I go down then you go down to, or something like that. I am sure there was some political payback involved too for dramatic effect. Regardless, we all know what the public policy is. I still would have liked to be that whistleblower that got a third of that $130 million settlement.
I disagree. The recent Mario Gabelli $130 million settlement is an indication the fraud is genuine and potentially criminal. First, there are many more monied investors and businesses using front companies to qualify for designated entity status and winning auctions, besides Gabelli and the ones listed above. It is rampant and the FCC knows it. Basically, like in Auction 35 for C & F blocks PCS, the shams are all over the place. The Department of Justice did join the suit of Gabelli at the last minute and claimed a victory for the taxpayer and citizen, but this was smoke and mirrors because it was covering for the FCC. The FCC had turned a blind eye to its awareness of the fraud in the auctions. Do not ignore that submitting the application forms for an auction with false information is potentially criminal. Remember how they got Al Capone. The greater picture is, however, not that Gabelli and all the prolific number of sham entities got spectrum at a discount and flipped it for a great profit, but that the FCC turned a blind eye. Little press has appeared over the Gabelli lawsuit. Less still about FCC complicity. The FCC was essentially using these people like Gabelli to do its bidding for them like as shill bidders to raise the final bid price of the spectrum. So Gabelli got off the criminal hook with just a settlement because he pointed the finger back at the FCC and said if I go down then you go down to, or something like that. I am sure there was some political payback involved too for dramatic effect. Regardless, we all know what the public policy is. I still would have liked to be that whistleblower that got a third of that $130 million settlement.