Gabelli Pays $130M to Settle Spectrum Fraud Charges
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Wall Street money manager Mario Gabelli agreed Thursday to pay $130 million to settle civil allegations that he and his affiliates rigged Federal Communications Commission (FCC) spectrum auctions.
Whistleblower R.C. Taylor III, who originally initiated the lawsuit, will receive $32.2 million of the settlement.
According to the Department of Justice (DoJ) complaint, the FCC established rules for certain auctions that permitted only "small" or "very small" businesses to participate or to qualify for bidding credits and favorable financing.
The DoJ said although Gabelli and his affiliated companies did not qualify for these auctions, Gabelli masterminded a scheme to nevertheless participate in the wireless auctions.
"The FCC and all government agencies should be able to trust companies which certify information about eligibility to participate in government programs," Assistant Attorney General Peter D. Keisler said in a statement.
"This settlement is an example of the government's determination to ensure that valuable federal resources are protected from fraud and abuse."
Gabelli used his scheme over the course of eight FCC auctions from 1995 to 2000.
According to the DoJ, the scheme violated the False Claims Act and Gabelli and others were "unjustly enriched" by submitting false certifications of eligibility to the FCC to participate in the auctions.
Gabelli, according to the DoJ, recruited friends and other associates to serve as officers of bogus small or very small businesses that existed only on paper, solely to certify that they met the FCC's eligibility rules.
The government further claims the supposed owners of these sham entities were never controlled by the individuals but remained in the hands of Gabelli and his affiliated firms.
Several licenses were ultimately transferred to third parties for substantial gain.
The DoJ claims Gabelli's "telecommunications entrepreneurs" included a former aerobics instructor, the caretaker of Gabelli's vacation home and a retired professional basketball player.
The DoJ said another of Gabelli's fronts did not know the meaning of "spectrum" or what the term "FCC" meant. The government further claims none of the individuals "possessed any relevant telecommunications experience or knowledge."
Under the whistleblower provisions of the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of the settlement if the government takes over the case and prosecutes it successfully.
As a result of Taylor's original lawsuit, the government took over the case.
"The public airwaves are a scarce and valuable resource. This settlement protects the integrity of the FCC auction program, and reminds all those who seek to benefit from the use of public resources that they must turn square corners when dealing with the government," U.S. Attorney Michael J. Garcia said.
"Mr. Taylor performed a true public service by blowing the whistle here."