Tiff over LightSquared reveals odd partnership

Harbinger's Falcone, who started the carrier, took advice from a software executive but kept his distance

LightSquared founder Philip Falcone's response to ethics allegations by a U.S. senator sheds some light on a strange chapter in the carrier's ongoing bid to build a controversial cellular data network.

In a Jan. 23 letter, Senator Chuck Grassley of Iowa accused Falcone of hinting he could help out the senator in return for his softening an investigation of LightSquared's dealings with the U.S. Federal Communications Commission (FCC). As part of his allegation, Grassley said a software executive had contacted his office and all but offered to build a data center in Iowa if Grassley left LightSquared alone.

This week, Falcone's Harbinger Capital Partners hedge fund challenged Grassley's version of the story in several respects, accusing him of leaving out key events and pitching unfounded allegations to the media. On Wednesday, Grassley's office defended the senator's letter, saying it had fully reflected his interactions with Harbinger.

However, Falcone's immediate emailed response to Grassley, which Harbinger released on Tuesday, provides a glimpse into an odd episode in which the head of an apparently unrelated software company may have advocated for LightSquared all on his own.

LightSquared wants to build a terrestrial mobile network using frequencies next to those used by GPS. The company would sell services wholesale to other carriers. The FCC approved its plan last year on the condition that concerns about interference with GPS be resolved first.

Grassley, whose state is home to several facilities of John Deere, a vocal opponent of LightSquared's plan, is investigating whether President Barack Obama's FCC gave LightSquared preferential treatment in return for political contributions.

According to Grassley's letter, on Jan. 6, Fine Point Technologies Chairman and CEO Todd Ruelle called his office and said there would be a call center in the Midwest, possibly in Iowa, if LightSquared won FCC approval. Ruelle also said he would only get paid if a deal went through to approve the network, according to Grassley. The senator said he suspected that call was related to an email in which Falcone had said a LightSquared approval could be a "win" for Grassley.

The same day Grassley sent the letter, Falcone replied to the senator via email. He said the "win" was simply in reference to expanded mobile offerings in rural areas. Falcone also distanced himself from Ruelle.

"Todd Ruelle does not work for me nor has he ever worked for me," Falcone wrote. "Moreover, I do not have an agreement with him about any current or potential success payment. Finally, I have never had ANY contractual relationship with him.

"I get many people calling me, emailing me daily saying they can help, they have advice, they have the next engineering solution etc. etc. Sometimes I listen to what they have to say, sometimes I don't. He is one of those guys," Falcone wrote.

Ruelle is also a longtime telecommunications executive who has held positions at MCI, Sprint International, former satellite service provider PanAmSat and other carriers, according to his biography on Fine Point's website. The privately held company, based in New York, sells software for remote device management, service installation, customer care management and other functions for Internet service providers.

Ruelle did not return a call requesting comment. But in his own response on Wednesday to Grassley's Jan. 23 letter, Ruelle denied he had offered an Iowa call center in return for Grassley laying off LightSquared. His comment about the call center was in response to a Grassley staff member's statement that LightSquared's LTE network would not create rural jobs, Ruelle wrote.

When he called Grassley's office, Ruelle said he had been offering Falcone advice about LightSquared. This much Harbinger admitted in a letter to Grassley on Tuesday. Falcone and Ruelle first met in 2007, and Ruelle contacted Falcone last June to offer advice and assistance. "Mr. Ruelle had significant experience in the telecommunications industry and Mr. Falcone appreciated and welcomed his potential contribution on the GPS issue and other matters," Mark Paoletta, a lawyer for Harbinger, wrote.

Ruelle also helped to set up an interview with Falcone on Fox News in September, Paoletta said. In addition, Falcone thought Ruelle could use his links with Deere to set up a meeting with that company.

However, judging from Falcone's Jan. 23 email to Grassley, the relationship has chilled. "For some reason or another, he, like many others is enamored with LightSquared and wants to see us succeed, which I can appreciate," Falcone wrote. "Unfortunately, some people overstep and try to be a hero despite not having a role at all. Maybe it's about the David vs. Goliath thing but whatever it is, there are many out there."

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

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