AT&T sued for involvement in closed spectrum auction

AT&T and AT&T Wireless are being sued for setting up a front company that enabled the communications giant to bid on and win licenses in the C & F block PCS spectrum auction supposedly reserved for small or minority-owned businesses.

The suit is brought by New York state-based TPS Utilicom, a participant in the auction that was conducted in December 2000 and January 2001. TPS claims that AT&T “through various affiliates and subsidiaries launched a front company, which it christened ‘Alaska Native Wireless LLC,’ to enable it to bid successfully on licenses reserved for small and minority-owned businesses and acquire bidding credits intended only for those businesses.”

A spokesman for AT&T Wireless denied the allegations.

“Alaska Native Wireless is an independent entity fully and properly qualified under FCC designated entity requirements. ATT Wireless is confident the lawsuit filed by TPS Utilicom is completely without merit,” he said.

According to the lawsuit, with only $1000 in assets and no gross revenue during the previous two years, Alaska Native registered for the auction as a “very small business.” But the company, bid $2.6 billion to win 26 licenses in the closed auction and another $300 million for an additional 18 licenses in the open auction. Of the $2.9 billion in total bids from Alaska Native, $2.6 million was provided by AT&T.

Though the relationship between AT&T and Alaska Native was known at the time of the auction, TPS claims AT&T did not properly disclose its ownership interest in the company and unjustly enriched itself while increasing costs for the closed auction’s other participants.

The lawsuit, filed in California’s Superior Court for Los Angeles County, seeks nearly $1.06 billion in restitution, punitive damages and disgorgement.

However, the court is not being asked to strip Alaska Native of its licenses--that request has been filed with the FCC, according to Brian Brooks, an attorney with O’Melveny & Myers, the law firm representing TPS. Monetary damages are the domain of the court system, he said.

“Because Alaska Native participated, [TPS] paid way too much for those licenses,” Brooks said. The lawsuit, then, seeks “money damages that would make us whole.”