Bloomberg News

Falcone Faces New LightSquared Questions After Grassley’s Query

January 25, 2012

Jan. 24 (Bloomberg) -- LightSquared Inc.’s effort to win support in Washington faces new scrutiny after a U.S. senator questioned hedge fund billionaire Philip Falcone about contacts with the lawmaker’s staff.

Grassley said yesterday that Falcone, whose Harbinger Capital Partners hedge fund is LightSquared’s main backer, and a telecommunications executive implied that they wanted the lawmaker to “pull punches” in an investigation.

“I won’t be part of that,” Grassley, an Iowa Republican, said in a letter to Falcone that sought details of Falcone’s contacts with the executive.

Grassley is reviewing whether authorities improperly accelerated the Reston, Virginia-based company’s partial approval last year. LightSquared’s plans to bring high-speed data service to as many as 260 million people need clearance from U.S. officials, who are weighing test results showing interference with the global-positioning system.

Falcone said in an October e-mail that LightSquared could be made “a win” for Grassley, the senator said in his letter. The executive, Todd Ruelle, said in a Jan. 6 telephone conversation with a member of the senator’s staff that a call center might be placed in Iowa if the service wins U.S. approval, Grassley wrote.

Grassley asked Falcone for details of any contacts with Ruelle and whether the man “has any contractual relationship” with LightSquared, Harbinger or Falcone, according to the letter.

Ruelle hasn’t worked for LightSquared, Harbinger or Falcone “as an employee or a consultant,” Lew Phelps, a Harbinger spokesman, said in an e-mail yesterday. Terry Neal, a LightSquared spokesman, referred questions to Phelps.

GPS Makers Object

Ruelle isn’t registered as a lobbyist for the company, according to Senate records. He didn’t return telephone calls yesterday seeking comment.

LightSquared’s prospects hinge on overcoming objections filed to U.S. regulators by makers and users of GPS devices.

GPS makers say LightSquared inappropriately plans to send powerful data signals on airwaves reserved mainly for faint emissions from satellites. They say LightSquared would disrupt navigation by aircraft, boats, tractors and cars. U.S. officials said last month the service interferes with a safety system that keeps planes from crashing into mountains and buildings.

LightSquared has said GPS manufacturers should have planned to accommodate the company’s use of the airwaves, and that technical solutions exist to resolve interference.

Lobbying Spending

The argument has sparked heightened spending by both sides. LightSquared more than tripled its lobbying expenditures last year to $2.55 million from $695,000 the previous year, according to U.S. Senate filings. The figures include spending to try to influence Congress as well as the federal agencies reviewing LightSquared’s proposal.

Lobbying spending by Trimble Navigation Ltd., a maker of GPS gear that opposes LightSquared’s plan, rose to $1.49 million from $440,000, according to Senate filings. Lea Ann McNabb, a spokeswoman for Sunnyvale, California-based Trimble, didn’t return a telephone call seeking comment.

The Federal Communications Commission’s preliminary approval in January 2011 attracted Grassley’s attention. The senator has demanded copies of correspondence between FCC Chairman Julius Genachowski and Falcone, and has said he will block two nominees to the FCC until he gets the information. Separately, he has queried LightSquared, Harbinger and GPS companies about their contacts with the FCC and President Barack Obama’s White House.

‘Pieces Missing’

The record provided by Grassley doesn’t show wrongdoing, Melanie Sloan, a former prosecutor and executive director of the Citizens for Responsibility and Ethics in Washington, said in an interview.

“There’s a lot of pieces missing,” Sloan said. “I can understand why Grassley’s troubled. It’s fair to ask questions.”

The vague offer of a call center “clearly calls for an explanation,” said Sloan, whose Washington-based group works to promote ethics in government. “It’s not a smoking gun that Phil Falcone has tried to bribe Senator Grassley.”

Questions include the nature of Ruelle’s relationship with Falcone, Sloan said. “It is not OK to exchange the potential for offering a call center in return for going easy on an investigation,” Sloan said.

Phelps, the Harbinger spokesman, said that if the conversation occurred, “Mr. Ruelle was acting entirely on his own.”

No Discussions

“No one at Harbinger or LightSquared has had any discussions or negotiations with Mr. Ruelle with respect to approaching or contacting Senator Grassley’s office regarding an alleged quid pro quo, or a call center in Iowa, which in any event would be inconsistent with the LightSquared wholesale business model,” Phelps said.

Grassley called Ruelle’s statement an “unseemly invitation to discuss a quid pro quo,” and Grassley’s staff was advised by the Senate ethics committee to avoid further contact with him, according to the senator’s letter.

Ruelle in a Jan. 6 e-mail to Grassley’s staff said, “conduct the investigation. You should,” according to a copy released by the senator yesterday.

Falcone in an Oct. 6 e-mail told a Grassley staffer that “the last thing I want to do is to make this more political than it already is,” according to material released by the senator.

“However, since we are already there, I believe I can make this into a win for the senator,” Falcone wrote, according to the copy released by Grassley. LightSquared could provide service throughout Iowa, and during emergencies such as tornadoes and floods, Falcone said in the e-mail.

Falcone Investment

Ruelle is listed as chief executive officer of Fine Point Technologies on the New York-based company’s website. Closely held Fine Point develops software for network operators, according to the website.

Ruelle held executive positions with MCI Inc. and was chief executive officer of Sonic Telecom, according to the website. Sonic Telecom Ltd., a company that transmitted video, was bought by PanAmSat Corp. in 2003.

Falcone has backed LightSquared with $3 billion. The service may be running short of money, Jonathan Atkin, a San Francisco-based analyst with RBC Capital Markets, said in an interview Jan. 13. Neal on Jan. 18 said LightSquared has “enough money to last us several quarters.”

--Editors: Michael Shepard, Steve Walsh

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net


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