Bloomberg News

LightSquared’s Falcone Didn’t Seek Weaker Probe, Harbinger Says

February 03, 2012

Feb. 1 (Bloomberg) -- Senator Charles Grassley wrongly suggested that Philip Falcone and an adviser sought to weaken the lawmaker’s inquiry into U.S. handling of the billionaire’s LightSquared Inc. wireless venture, Falcone’s hedge fund said.

Todd Ruelle, a telecommunications executive, “made no nefarious suggestions” and Falcone said “a wireless network for rural America would be a win,” Mark Paoletta, a Washington- based lawyer, said in a Jan. 31 letter responding to Grassley that Harbinger Capital Partners released today. The hedge fund invested $3 billion in LightSquared, which aims to offer high- speed data service to as many as 260 million people.

Grassley said on Jan. 23 that Falcone and Ruelle had “implied an invitation to pull punches” in the Iowa Republican’s investigation. Grassley, the top Republican on the Judiciary Committee, is reviewing whether the Federal Communications Commission improperly accelerated Reston, Virginia-based LightSquared’s partial approval last year.

LightSquared remains without final clearance as the FCC and other regulators weigh test results that show the service’s signals disrupt global-positioning system equipment used on autos, tractors, boats and aircraft.

Falcone said in an October e-mail to Grassley’s staff that LightSquared could be made “a win” for the senator, and Ruelle in a Jan. 6 telephone conversation with a Grassley staffer said a call center might be placed in Iowa, Grassley wrote on Jan. 23. The senator said the statements “taken together” implied an invitation to ease his inquiry.

Grassley Letter ‘Erroneous’

Ruelle told Grassley in a separate letter today that he provided to Bloomberg News by e-mail that “your letter is erroneous.” He added that “a quid pro quo was not intended, nor in my view, even suggested, by my statement.”

In a Jan. 6 e-mail to Grassley’s staff, Ruelle said, “conduct the investigation. You should,” according to a copy released by the senator Jan. 23 and mentioned in Ruelle’s letter today. The comment on call centers came up in response to a statement by Grassley’s staff that LightSquared wouldn’t create rural jobs, Ruelle said.

Ruelle “has, on occasion, given Mr. Falcone business advice,” Paoletta said in his letter. Falcone wanted Ruelle to set up a meeting between LightSquared and Deere & Co., the farm- gear maker that has expressed concern about interference from the proposed service.

Ruelle doesn’t have a contractual relationship with Falcone, Harbinger or LightSquared, and nobody at the wireless company or the hedge fund discussed Ruelle’s contacting Grassley staff in January, Paoletta wrote.

No Contract

Grassley’s letter “is accurate and fully reflects the contact to his office,” Jill Gerber, a spokeswoman for Grassley, said in an e-mail when asked about Ruelle’s letter.

Lew Phelps, a spokesman for Harbinger, said in an interview today that “I don’t know” why Ruelle was contacting Grassley. “Harbinger had absolutely no knowledge that he was making this contact,” Phelps said. “He has been specifically told a number of times that he’s not authorized to represent Harbinger. He did it without our knowledge, without our blessing.”

In his letter, Ruelle didn’t explain why, in the absence of a contractual relationship, he contacted Grassley’s office and when asked, Ruelle in an e-mail responded by referring to the Harbinger letter, which he called “accurate.”

In his letter, Paoletta also said “we take further issue with your claim that Mr. Falcone’s e-mail to your staff on Oct. 6 ‘implied an invitation to pull punches.’”

‘Rural Broadband Problem’

According to Paoletta, Falcone elaborated and clarified in a Jan. 23 e-mail that said, “finding a solution to the vast rural broadband problem across the U.S. by building out a wireless network for rural America would be a win and a good deed especially if one is located in rural Iowa where there are many connectivity issues.”

Falcone wants to meet with Grassley “to address any concerns you may have so that we can move forward on all relevant issues,” Paoletta said.

“Ruelle made no nefarious suggestions constituting a quid pro quo, but rather, appears to be referencing call centers in response to a question from your staff member,” Paoletta said in the letter.

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.

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

LightSquared’s prospects hinge on overcoming objections filed to U.S. regulators by makers and users of GPS devices who say the company inappropriately plans to send powerful signals on airwaves reserved mainly for faint emissions from satellites.

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.

--Editors: Steve Walsh, Michael Shepard

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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