There’s a White House scandal involving favoritism towards a specific company high on President Obama’s political agenda — and it’s not Solyndra.
In this case, the company owner happens to be a big Democratic Party donor. And in the pursuit of giving preference to a specific company, the White House undercut a legendary four-star general and potentially undermined U.S. national security. Adding fuel to the explosive story: at one time President Obama was a personal investor, with $50,000 of his own money.
The company? It’s called LightSquared. And you’re likely to hear more about it in the future. The scandal involves the White House overruling the Pentagon, endangering the American GPS commercial marketplace, and playing favorites to a single company — all to please a well-positioned Democratic donor and advance an Obama pet project.
A disturbing report yesterday by Eli Lake at the Daily Beast charges that the White House pressured U.S. Air Force General William Shelton, commander of the U.S. Space Command, to change his testimony about his opposition to a $14 billion LightSquared wireless internet project. The Space Command and Gen. Shelton warned that LightSquared could cripple the Pentagon’s Global Positioning System (GPS). Lake writes that the White House took sides in favor of LightSquared and against the Pentagon:
Shelton’s prepared testimony was leaked in advance to the company. And the White House asked the general to alter the testimony.
Other commercial industry figures agreed that the new wireless system could interfere with aviation safety, disrupt military and rescue operations, and interfere with high-tech farming equipment and consumer navigation devices.
For years within the telecom industry there have been persistent complaints that LightSquared majority owner Philip Falcone’s political connections with the White House and the Federal Communications Commission have led to political and regulatory favoritism for his company. Falcone is a hedge fund investor who made a fortune shorting subprime debt. He is worth $2.2 billion and has been close to the administration and to Democratic Party officials.
On Thursday, FCC Chairman Julius Genachowski was slated to testify before the House Armed Services Committee about the political patronage in the granting of fast-track waivers for the company. But Genachowski stood up the committee — he refused to appear. Said Rep. Mike Turner (R-OH):
I consider the chairman’s failure to show up today to be an affront to the House Armed Services Committee.
Turner added he wanted to hear personally why the FCC agreed to a conditional waiver for LightSquared.
Both the Solyndra and LightSquared scandals are part of a larger, emerging narrative about the Obama administration’s decision to pick business winners and losers. Like the solar scandal, LightSquared is part of an Obama industrial policy to reshape America’s business landscape in the Democrats’ own political image. In this case, Obama’s dream was universal wireless broadband for all Americans.
In the Solyndra scandal, the White House pressured the U.S. Department of Energy to provide a half-billion dollar grant to a financially questionable solar energy company in pursuit of the president’s agenda for “green” technology.
In this LightSquared scandal, General William Shelton was asked by the Office of Management and Budget — an arm of the White House — to change his testimony. Even more damaging, OMB shared the general’s testimony with LightSquared.
LightSquared employs an army of eight high-powered lobbying firms, including one headed by former Democratic House Majority Leader Dick Gephardt. In 2011 alone, LightSquared spent $720,000 on lobbyists.
Quoting Rep. Turner, Lake reported:
“There was an attempt to influence the text of the testimony and to engage LightSquared in the process in order to bias his testimony,” Rep. Mike Turner (R-OH) said in an interview. “The only people who were involved in the process in preparation for the hearing included the Department of Defense, the White House, and the Office Management and Budget.”
iWatch, a project of the Center for Public Integrity, has conducted an exhaustive investigation of LightSquared and its high-level Obama connections. They found that in addition to the president, Donald Gips — Obama’s former personnel chief — had $500,000 invested in LightSquared. Gips raised half a million dollars as a “bundler” for the president’s 2008 campaign, and now has the politically coveted position of U.S. ambassador to South Africa.
iWatch also had harsh words for Obama’s head of the Federal Communications Commission, Julius Genachowski. Genachowski also was one of Obama’s biggest fundraisers, bundling $500,000 for Obama’s presidential run. Under his chairmanship, the FCC granted special rulings and waivers to allow LightSquared to operate.
Falcone and his company also made major contributions to the FCC while his case was pending before the commission. In September 2010, LightSquared CEO Sanjiv Ahuja made a $30,400 contribution to the Democratic Party, the maximum donation allowable by law. Falcone twice gave the maximum allowable.
iWatch traced LightSquared payments to contacts within the administration. On September 22 Ahuja met with James Kohlenberger, Obama’s chief of staff for the White House Office of Science and Technology. A day later Ahuja gave $30,400 to the Democratic National Committee. A week later, on September 30, Falcone and his wife reportedly each gave $30,400 to the Democratic Senatorial Campaign Committee.
“Hi Aneesh!” LightSquared representative Dave Kumar wrote to Aneesh Chopra, the president’s chief technology adviser on Sept. 23, 2010. “I touched base with my client Sanjiv Ahuja and he expressed an interest in meeting with you. … He is going to be in D.C. next week for a fundraising dinner with the president.” The email was one of 300 emails obtained by iWatch.
In two separate rulings, the FCC favorably approved LightSquared requests: on March 26, 2010, and on January 26, 2011. The rulings allowed the company to switch from a satellite company to a wireless system based on 400,000 towers. The tower system could interfere with many GPS signals.
GPS proponents have been dismayed by the quick FCC rulings. “The whole process has been highly unusual,” said Dale Leibach, a spokesman for the industry group Coalition to Save Our GPS . “The FCC typically doesn’t act quickly on matters before them, and they acted with great haste and lightning speed” on LightSquared.
Like solar energy, Obama has pressed for a bold agenda for universal broadband availability. In his 2010 State of the Union address, the president became a big cheerleader for the idea. The president demanded that broadband be given to 98% of the American people. In February 2010, Obama released a bill called the American Jobs Act which called for universal coverage. He told a group of college students: “This isn’t just about faster Internet or being able to find a friend on Facebook. It’s about connecting every corner of America to the digital age.”
The president wasn’t only intellectually involved. Investment manager George W. Haywood steered Obama toward putting some of his personal money into the wireless company. Obama bought into it with a $50,000 investment, according to his 2005 Senate financial disclosure form.
Haywood has remained close personal friends with the president. Haywood and his wife attended the first White House state diner and a Super Bowl party at the White House in 2009.
In February 20, 2010, Haywood and Genachowski together met at the White House. A White House spokesman said the two men watched the NBA All-Star Game with Obama in the White House residence quarters. “That was a poker game,” said Haywood. “It was poker, pizza, beer and the … game.”
Obama explained during the 2007 campaign how he invested in the wireless company. “After I got my ($1.9 million) book contract, I had money to invest,” he said, referring to his second book, The Audacity of Hope. He said he wanted “a more aggressive strategy than the normal mutual funds.”
“I thought about going to Warren Buffett and I decided it would be embarrassing with only $100,000 to invest to ask his advice,” Obama told reporters. Instead, Haywood recommended a UBS stockbroker, who bought more than $50,000 in stock in SkyTerra Communications, which would become LightSquared.
For quite some time Senator Charles Grassley (R-IA) has been trying to get the FCC to disclose information about LightSquared’s investors and their relationship to the White House. His office says they have had no success. Grassley asked:
Are there ties between the investors and the administration that might lead to the perception that the administration is biased toward approval? … In the absence of transparency, the perception might be that the FCC is rushing the public’s business to help a friend in need, regardless of the consequences for the public and the economy.
Thirty-four senators, including eight Democrats, wrote Genachowski in May of this year asking the commission to rescind LightSquared’s waiver. “GPS is integral to the functioning of our economy, and is essential for public safety.” Until the company can prove that its wireless system does not affect GPS use, “we request the Commission rescind LightSquared’s waiver.”
On May 31, Genachowski said he would not permit LightSquared to go into commercial service, but he did not rescind the waiver.
On June 23, the House Appropriations Committee passed a resolution to halt FCC expenditures on the LightSquared project until there are assurances it won’t disrupt GPS signals.
The LightSquared case has been quietly simmering in the background for years within the telecom community. But now with possible tampering of a four-star general’s testimony, the episode should get a greater public airing.
If so, in addition to a sinking economy the other narrative that might emerge is that the Obama administration — which promised openness and integrity in governance — is an administration full of insider dealings, political favors, and deceit.