Gabelli in Airwaves Bidding After $130 Million Settlement

Among the 23 bidders cleared to take part in the first major auction of U.S. airwaves in five years are a satellite TV provider, telephone companies, venture capitalists and a familiar name on Wall Street: Mario Gabelli.

Gabelli, founder and chief executive officer of Gamco Investors Inc., paid $130 million in 2006 to settle charges that he used sham companies in earlier auctions. He didn’t admit wrongdoing and took part in an airwaves sale weeks later.

Now he’s back as chairman of the voice- and data-communications holding company that owns Lynch 3G Communications Corp., one of the bidders eligible to take part in the sale that begins Jan. 22 at the Federal Communications Commission.

“We use it as a growth opportunity, to get into other areas, sometimes if there’s an attractive value there,” Lynch 3G President Robert Dolan said in an interview. FCC restrictions prevent the company from freely discussing its plans for the auctions, Dolan said.

The sale will raise at least $1.56 billion and is the first chance since 2008 for companies to enter an open government auction for airwaves needed to meet surging demand from smartphones, tablets and other wireless devices. For the administration of President Barack Obama, which has singled out airwaves sales as a priority, the auction serves as a test run for two more airwaves sales planned over the next two years.

The auctions aim to avert what the administration calls a spectrum crunch, when wireless capacity fails to meet demand from growing mobile connections.

Gabelli’s Eligibility

Lynch 3G’s parent, LICT Corp., lists Gabelli as chairman and chief executive officer. Lynch and other LICT properties hold wireless licenses from two earlier auctions and in five states, according to FCC filings.

Gabelli, 71, is majority owner of Gamco, which like Lynch is based in Rye, New York. Gamco managed $43.5 billion as of Sept. 30, a record for the firm.

Dolan, saying he was speaking for Gabelli, declined to discuss whether the money manager should be allowed to participate in auctions following the 2006 settlement. He directed questions to James Barker, an attorney at Latham & Watkins in Washington.

“Lynch 3G is a licensee in good standing at the FCC, has been found qualified to participate in FCC auctions both before and since 2006, and recently again has been found by the FCC to be a qualified bidder in the upcoming H Block auction,” Barker said in an e-mailed statement.

Charges Settled

The FCC cleared Gabelli to take part in the 2006 auction after he settled the charges that in eight auctions from 1995 to 2000 he fraudulently received bidding preferences available to small businesses to help them afford licenses. Some licenses were transferred to third parties “at a substantial profit,” the Justice Department said in a news release.

People were recruited to serve as officers of bogus small companies, according to a Justice Department complaint. Those recruited included an aerobics instructor, a vacation-home caretaker and a retired professional basketball player, according to the Justice Department, which didn’t name the individuals.

In that year’s auction, which raised $13.7 billion, Gabelli’s Lynch AWS Corp. spent $485,000 for an airwaves license in the Topeka, Kansas, area, according to a company filing and FCC records.

LICT is listed on the Pink Sheets market, which offers trading in stocks that aren’t registered with the Securities and Exchange Commission.

In a description of its business for 2012 posted on its website, LICT said it provides broadband and voice services in 12 states including California and New York.

Pipeline Reopening

Next week’s sale of airwaves called the H Block begins a series planned to last through 2015, finishing with the auction of frequencies voluntarily surrendered by television stations.

“The spectrum pipeline is reopening,” FCC Chairman Tom Wheeler said in a speech last week. “We need to bring more spectrum capacity to market ... and fast.”

The biggest participant cleared by the FCC to take part in the auction is Dish Network Corp., which under Chairman Charlie Ergen has pledged to bid a minimum aggregate of $1.56 billion, guaranteeing the sale won’t flop. In return, Ergen won flexibility for using airwaves he already holds.

Gabelli’s activities in the 1990s show the FCC’s “naive” approach to auctions, Roger Entner, an analyst at Recon Analytics in Dedham, Massachusetts, said in an interview.

“He’s the best argument for an exception-free auction process, where everybody is treated equally -- because guys like him will find a loophole,” Entner said.

Lynch 3G isn’t asking for bidding preferences available to small firms, according to FCC filings.

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