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LightSquared Lenders Seek Ergen ‘Bait and Switch’ Papers

LightSquared Inc. lenders can force Dish Network Corp. Chairman Charles Ergen to respond more fully to a request for information about an alleged “bait and switch” he used in a $2.2 billion bid for the bankrupt wireless-service provider’s spectrum, a judge said.

U.S. Bankruptcy Judge Shelly Chapman in Manhattan today granted the lenders’ request to have Ergen and Dish produce more information by searching for certain terms in e-mail accounts.

“It’s not that complicated,” she told lawyers.

The lender group is investigating how Ergen, Dish and Ergen’s SP Special Opportunities fund acted before the bid. They said in court papers that Ergen’s lawyers had delivered only 57 pages of records while rejecting 16 of 18 requests for documents.

Dish, SPSO and Ergen acquired a large position in LightSquared’s debt while making a buyout bid that they didn’t intend to pursue unless there was a higher offer, the lenders said. They called it a “concerted ‘bait and switch’ bidding strategy.”

“If the auction was unsuccessful, they intended to terminate the bid when the debtors were in a cash crisis,” the lenders said. That might have forced LightSquared to liquidate, driving down the price of the spectrum, they said.

Another Search

LightSquared, based in Reston, Virginia, filed for bankruptcy in May 2012 after the Federal Communications Commission blocked its service, saying it might interfere with global-positioning-system navigation equipment.

The company won court approval of the rough terms of a reorganization plan on Feb. 24. It will pursue final approval of the plan after creditors vote on it. It is still litigating claims against Ergen and SPSO.

At today’s hearing, lawyers argued over whether Ergen’s e-mails would need to be searched again for terms such as “LS,” which may have been used as an abbreviation. A prior search looked for references to the company’s full name.

The case is In re LightSquared Inc., 12-bk-12080, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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