WASHINGTON-Cellular Telecommunications Industry Association President Thomas Wheeler has close financial and business ties to two top wireless data firms-an arrangement CTIA’s top board members are comfortable with while others see it as a potential conflict of interest.
Wheeler, according to documents filed with the Securities and Exchange Commission and other sources, sits on the board of directors of Aether Systems Inc., a high-flying wireless data firm and a CTIA member that is based in Owings Mills, Md.
Aether’s stock, offered in an initial public offering on Oct. 21 at $16 on the Nasdaq stock exchange, has risen dramatically in recent months. Shares closed at $87.50 on Friday.
Wheeler, who became a manager of Aether in May and was elected a director on Oct. 20, has vested options to purchase 37,500 shares of Aether common stock at $1.77 per share. In addition, according to Aether investor relations director Greg Lampf, Wheeler has indirect ownership of 6.7 million shares in Aether.
Lampf said Wheeler’s indirect ownership of Aether stock comes as a result of the CTIA president’s connection to NextGen Technologies Inc., which he described as a holding company of sorts. NextGen has a $26.1 million stake in Aether.
Aether is a member of the Wireless Data Forum, an incorporated organization housed within CTIA’s offices that promotes wireless data. Mark Desautels, WDF’s managing director, said CTIA provides management services to WDF. Desautels said Wheeler’s ties to Aether do not pose any conflict of interest.
However, a top wireless data official at Qualcomm Inc. who sits on WDF’s board said he knew nothing of Wheeler’s outside wireless business activities and sees potential problems with it.
“The risk would be if they [Aether] would get preferential treatment,” said David Brandos, Qualcomm Inc.’s director of product marketing. “One of the areas Tom can affect is how much exposure these companies get.”
Other WDF board members did not return calls for comment.
RCR also learned last week that Wheeler is in line to sit on the board of Palo Alto, Calif.-based OpenSky, another up-and-coming wireless data joint venture between Aether and 3Com Corp. 3Com is a network equipment manufacturer and owns Palm Computing Inc.
“This was discussed in advance with the organization [CTIA] and I have their approval to do it,” said Wheeler.
Stan Sigman, president and chief executive officer of SBC Wireless and chairman of CTIA’s board, said Wheeler approached him several months ago about Aether. Sigman said Wheeler’s contract requires only prior approval from CTIA’s chairman. Sigman said he turned down Wheeler’s requests in the past to serve on other boards because of conflict-of-interest problems.
Eve Shepard, director of research and information services at the American Society of Association Executives, said the organization has a standard of conduct that speaks to conflict-of-interest issues in not-for-profit organizations, like CTIA. “It is nothing that industry has to abide by, it is something for them [ASAE] to aspire to.”
Indeed, rules governing outside activities of association executives are not clear cut. Much, it appears, depends on how contracts are structured.
Wheeler said his wireless business activities outside CTIA do not violate his contract with the trade group. In fact, according to Wheeler, his contract provides leeway for such entrepreneurial activities.
Several major carriers were quick to rally around Wheeler, who has headed CTIA|since 1992.
“We have no concern that Tom Wheeler’s integrity would be for sale at any price,” said Sigman.
Andrew Sukawaty, chief executive officer of Sprint PCS and vice chairman of CTIA’s board, also said he was not aware of a conflict-of-interest problem.
Aether’s products and services do not pose a competitive threat to wireless carriers, which use them.
But in the future, other WDF firms may compete with Aether.
“It [Wheeler’s outside wireless business activity] was known and we don’t see it as anything to be concerned about,” said Jim Gerace, a spokesman for Bell Atlantic Mobile.
Nothing could be found in other wireless trade associations resembling Wheeler’s financial and business arrangements with outside wireless firms.
Jay Kitchen, president of the Personal Communications Industry Association, said he made a personal decision early on not to invest in any members (or any telecommunications firms) and not to sit on boards of any telecom firms.
“It’s just not worth the perceived conflict of interest,” said Kitchen.
“I never wanted to take a chance I’d get a call like the one we’re on,” Kitchen added.
Likewise, American Mobile Telecommunications Association President Alan Shark and Industrial Telecommunications Association President Mark Crosby said they neither hold interest in any member of their respective organizations nor sit on the board of any member firm. When asked to do so, each said he turned the offer down.
“I’d be placing myself and the association in jeopardy because of the perception of a conflict of interest,” said Shark.
He added: “None of us want to jeopardize our ability to navigate the [Federal Communications Commission] and Congress. We don’t want any black clouds over us.”
“Personally,” said Crosby, “I’m very, very careful. I like my job.”
