Gabelli Pays $130M to Settle Spectrum Fraud Charges


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.”

News Around the Web