Obama Campaign Donor Wins FCC Waiver From Auction Rules

A private-equity company owned by a campaign donor to U.S. President Barack Obama won a waiver from the Federal Communications Commission that may help it bid in airwaves auctions.

Grain Management LLC may not have qualified for benefits reserved for small businesses because airwaves leases to AT&T Inc. and Verizon Communications Inc. caused it to exceed the program’s income limits, the company had said in an FCC filing. The agency has adopted a waiver, an FCC spokesman, Neil Grace, said yesterday in an e-mail without providing details.

Grain Management, based in Sarasota, Florida, invests in media and communications and is controlled by David Grain, according to the company’s March 4 filing asking the FCC to waive the rule.

“Certainly there has not been a waiver like this,” Andrew Jay Schwartzman, a Georgetown University law professor, said in an interview. “The circumstances have not arisen” with the revenue of the largest wireless providers entering the picture.

David Grain 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.

The FCC, led by Democratic Chairman Tom Wheeler, voted 3-to-2 along party lines behind closed doors July 21 to waive the rule, allowing the company to seek bidding credits that offer discounts on winning bids, according to people with knowledge of the vote who asked for anonymity because the proceedings hadn’t been made public.

1,614 Licenses

“We are very excited about the waiver” because it appears to relax rules for companies other than Grain, too, and may help small and minority businesses participate in the forthcoming wireless auctions, Nicol Turner-Lee, vice president at the Minority Media & Telecom Council, said in an interview.

The Washington-based nonprofit that seeks to preserve and expand minority ownership in telecommunications in April told the FCC it supported Grain’s request.

The airwaves auctions, which were authorized by Congress, are intended to raise at least $28 billion for U.S. national priorities including debt relief. A sale earlier this year of 10 megahertz raised $1.56 billion.

A sale in November will offer 1,614 airwaves licenses for 65 MHz of airwaves. It’s part of a series of U.S. auctions designed to provide more frequencies for use by smartphones. It will be the largest since a 2008 auction that drew bids totaling more than $19 billion, Wheeler said March 31 as the commission set rules for the sale.

Auction Participation

Without the waiver, the leases to AT&T and Verizon would have forced the FCC to include the wireless titans’ revenue when deciding whether Grain Management met criteria for bidding help in auctions. That may deny Grain Management help designed for small companies, the company said in its filing.

“We should have the right to prove we qualify,” Michael McKenzie, a partner and chief strategy officer at Grain Management, said in an interview. “Let’s make sure we’re not excluding people who actually belong in the category.”

“Treating entrepreneurs and small businesses like multibillion-dollar corporations when competing for spectrum licenses could deter them from participating in auctions,” Grace said.

Among numerous U.S. lawmakers to receive donations from David Grain was Representative James Clyburn, a South Carolina Democrat who received $8,400 from 2009 to 2012, according to the FEC. He is the father of Mignon Clyburn, a Democratic FCC commissioner who voted to approve the waiver.

Asked about David Grain’s contributions, McKenzie replied, “There shouldn’t be an attempt to create a political issue where there is none.”

“Any decision is clearly on the merits, and that’s it,” McKenzie said.