NEW YORK—Lawyers for the Justice Department, Wall Street investor Mario Gabelli and Lynch Interactive Corp. told a federal judge they have settled a suit over spectrum auctions. The suit accuses Gabelli of defrauding the U.S. government of at least $85 million by hiding his firm’s control of small firms that received bidding discounts for wireless licenses won at spectrum auctions during the 1990s.
Assistant U.S. Attorney David Kennedy told U.S. District Judge Paul Crotty the Justice Department has signed off on the proposed settlement of the auction fraud litigation.
Terms of the proposed settlement are expected to be made public June 29 when documents are to be officially filed with the U.S. District Court for the Southern District of New York. The settlement will be submitted to Crotty to review several days before that date.
Lawyers for the parties declined to comment on the dollar figure involved in the settlement, though news accounts said Gabelli may have to pay $100 million to put an end to a suit filed in 2001 under the False Claims Act.
Crotty signaled he was getting impatient with the failure of the parties to reach a deal since settlement talks began in late April.
Gabelli and Lynch have steadfastly denied any wrongdoing and predicted the court would vindicate them. The case originally was set to go to trial this month.
According to a Securities and Exchange Commission filing by a company affiliated with Gabelli-led Lynch Interactive, the defendants had concerns about rising legal costs and lack of insurance coverage to pay hefty legal bills already in the millions of dollars.
The U.S.-Gabelli settlement of the auction fraud suit comes amid controversy over the Federal Communications Commission’s attempt to revise small business, or designated entity, bidding rules to prevent sham companies from being created ahead of the scheduled Aug. 9 start of the advanced wireless services auction.
However, various parties unhappy with DE rule changes are expected to slap the FCC with a lawsuit this week in hopes of getting the commission’s new small business bidding guidelines set aside. Such litigation could further delay the start of the AWS auction, originally set to begin June 29.
On a related front, the 2nd U.S. Circuit Court of Appeals is expected to rule later today on whether the AWS auction should be delayed so that the FCC can conduct an environmental impact statement to assess potential health risks associated with the upcoming auction of 1,122 wireless licenses.
