House Republicans Probe FCC Auction Waiver to Obama Donor

Republican lawmakers opened an investigation into why a company owned by a campaign donor to U.S. President Barack Obama received a potentially money-saving wireless-auction waiver from the federal government.

The House Energy and Commerce Committee is asking for copies of correspondence between Grain Management LLC and the Federal Communications Commission going back to the day Tom Wheeler took over as chairman of the agency last year. The FCC also should turn over draft copies of the waiver, committee Chairman Fred Upton of Michigan said in a letter today. The FCC said it welcomes the committee’s request.

The waiver, first reported by Bloomberg News on July 22, gives Grain a chance at bidding preferences reserved for small, women- and minority-owned businesses for an airwaves auction in November. Because of Grain’s business dealings with AT&T Inc. (T) and Verizon Communications Inc. (VZ), the company, without the waiver, would have been above the income threshold for small business qualification.

“The Energy and Commerce Committee is committed to conducting vigorous oversight to ensure that commission processes are fair, open, and transparent, and that they serve the public interest,” Upton said. “The granting of the Grain Management waiver raises questions about these processes.”

The company is owned by David Grain, who identifies as African-American in a company filing to the FCC. He contributed more than $60,000 to Obama’s presidential campaign and the Democratic National Committee in 2008, and $22,500 in 2012, Federal Election Commission filings show. He was also one of Obama’s top fundraisers for the 2008 election, bringing in $200,000 to $500,000, according to the campaign.

Jesse Jackson

The FCC waiver passed with the three commissioners who are Democrats, including Wheeler, voting for it and the two Republicans against it. The waiver grants an exception to what it called “the bright-line application” of a rule for Grain Management.

The action, and Republican criticism about it, have attracted attention beyond usual FCC circles.

“Why bring issue and concern around a request seeking relief to participate simply as a bidder, not a winner, in an auction only a few months away?” the Rev. Jesse Jackson said in a July 25 statement distributed by e-mail.

The FCC expects the airwaves auction to attract more than $10 billion in bids.

Wheeler Communications

The FCC’s action “raises questions” about whether processes at the agency are fair, said Upton, in the letter that was also signed by Representative Greg Walden of Oregon and Representative Tim Murphy of Pennsylvania, both Republicans. Walden is chairman of the Subcommittee on Communications and Technology that oversees the FCC, and Murphy is chairman of the Subcommittee on Oversight and Investigations.

The lawmakers in their letter asked the FCC for documents including all communications between the agency and Grain since Nov. 4, 2013 -- the first day on the job for Wheeler, who also was a fundraiser for Obama. Wheeler raised more than $500,000 for Obama’s re-election in 2012, and from $250,000 to $500,000 for the 2008 campaign, according to disclosures by the president’s campaign committee.

The lawmakers cited a Bloomberg News report earlier this month about the waiver that appeared before the FCC announced the action.

Grain Management has said it received the waiver on merits, and because it should have the right to demonstrate it can be eligible for auction preferences. The FCC in a statement last week said treating small businesses like large corporations could deter them from participating in auctions.

AT&T, Verizon

“We welcome the committee’s request for information about the commission’s recent action to promote the ability of entrepreneurs and small businesses to compete in our upcoming auctions,” Neil Grace, an FCC spokesman, said in an e-mailed statement today.

The FCC’s action followed a public notice and comment period, and “is consistent with Congress’s directive to design auctions that encourage participation among a wide variety of companies, including small businesses,” Grace said.

Representative Henry Waxman of California, the top Democrat on the committee, called the investigation “baseless and partisan.”

“The FCC did exactly what it should do, which is to promote competition and encourage participation in the auction,” Waxman said in an e-mail. “It followed long-standing commission precedents in the process it used.”

Grain leases airwaves to AT&T and Verizon, the largest mobile-service providers in the U.S. Without a waiver the FCC would have to include the wireless titans’ revenue when deciding whether Grain met criteria under the preferential rules for small, women- and minority-owned businesses. The inclusion of that revenue may deny Sarasota, Florida-based Grain Management help designed for small companies, the company said in a filing.

Grain received the airwaves last year from the carriers, an arrangement that furthers FCC goals by extending opportunity in the wireless market to a minority-owned business, the deal’s participants told the agency in a proposal. The FCC approved the leases six months later and said the deal would promote opportunities for “entrepreneurs and other small businesses.”

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

To contact the editors responsible for this story: Romaine Bostick at rbostick@bloomberg.net Elizabeth Wasserman

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