DOJ moved to dismiss $3.3B fraud suit against Dish after chairman Charlie Ergen donated $113K to Biden
By: nypost (New York Post)
S E E D E D C O N T E N T
The Justice Department took the rare step earlier this month of moving to dismiss a $3.3 billion civil fraud lawsuit against Dish Network — months after founder Charlie Ergen and his wife donated more than $113,000 to President Biden's re-election campaign late last year.
Ergen, a former professional poker player who helped launch what was then called EchoStar Communications in 1980, has battled the federal fraud claim for nearly a decade.
But the Tennessee native saw his luck change shortly after he and spouse Candy contributed $100,000 to Biden's super PAC and maxed out with matching $6,600 donations to the president's principal campaign committee in December, according to campaign finance filings.
This past January, Dish nabbed a $50 million grant from the administration to help expand 5G coverage nationwide — the "largest award" of its kind, the company crowed — through a $1.5 billion fund created by the CHIPS and Science Act.
Dish chairman Charlie Ergen has battled a civil fraud claim for nearly a decade — which could potentially bankrupt his company. REUTERS
On Jan. 12, two days after the $50 million award was announced, attorneys at the Justice Department intervened on behalf of Dish — and "tried to bully" Vermont Telephone, which filed the fraud claim, "into an unethical settlement" by threatening to have the suit dismissed, according to lead attorney Bennett Ross.
The move to dismiss the case scrapped plans to depose the Ergens about their knowledge of the allegedly fraudulent scheme, prompting Vermont Telephone's attorneys to accuse the Justice Department of political interference.
"[I]t appears that the effect — if not the purpose — of the DOJ's rush to seek dismissal of this case is to protect Mr. Ergen from being questioned under oath," Ross wrote in a Feb. 8 letter to the lead DOJ attorneys handling the case, according to a copy reviewed by The Post.
"We do not believe it is a coincidence that Mr. Ergen, his wife (who also is scheduled to be deposed next week), and DISH's Political Action Committee collectively contributed in excess of $5 million to Democratic candidates and causes between 2008 and 2022," he added.
"With the upcoming election, this case looks like just the latest example of the DOJ's two-tiered justice system under which the well-heeled, politically connected are treated one way, while everyone else is treated differently."
The government officially filed a motion to dismiss on March 8. A ruling by senior DC US District Judge Colleen Kollar-Kotelly is pending.
The DOJ's Civil Division had opposed the case being dismissed in 2022 and 2023, court filings show, and interference in such fraud claims is highly uncommon.
The Commerce Department gave its "largest award" yet to Dish from a $1.5 billion fund created by the CHIPS and Science Act, one of Biden's most celebrated achievements of his administration. AP
"As far as we are aware, relators have filed approximately 4,000 [similar] actions under the False Claims Act since 2018, and the DOJ moved for dismissal in approximately 65 of those cases, which is less than two percent," Ross told The Post.
"And in those cases where the DOJ has sought dismissal, it generally was because the case suffered from a fatal defect, which is not the case with Vermont Telephone's claims against DISH."
In their motion, DOJ attorneys wrote that "the benefits to the Government of continued litigation are marginal given the lack of evidence and the difficulty in establishing damages. Conversely, the costs to the Government (and this Court) are high as a result of extraordinary discovery."
By holding controlling stakes in smaller enterprises, Dish won $3.3 billion extra in wireless licenses before the company was even offering cellphone service.
The dispute began in 2015, when Dish placed $13.3 billion in wireless license bids as part of a Federal Communications Commission auction designed to help "very small businesses," defined as those with revenues lower than $15 million, according to FCC filings previously reported by the Wall Street Journal.
With the help of asset manager BlackRock, Dish scooped up nearly half — 702 of 1,600 — of the wireless licenses, or spectrum, sold at auction by smaller enterprises in which it held controlling stakes, and that qualified for a 25% discount.
That allowed Dish to place bids on $3.3 billion in spectrum in Boston, New York and Chicago — before the company was even offering cellphone service.
The Vermont Telephone Company sued Dish and its smaller enterprises — Northstar Wireless and SNR Wireless — in Washington, DC, federal court for engaging in the "fraudulent bidding scheme," according to a May 13, 2015, complaint. Vermont Telephone Company
"The Defendants short-changed the government $3.3 billion, an amount that remains unpaid to this day," Ross said. "They also corrupted a program designed to benefit real small businesses, distorted the FCC auction process, and thwarted the deployment of wireless spectrum for the benefit of the public. The Defendants should be held accountable."
The FCC later rejected those fraud claims but denied Dish any of the $3.3 billion in bidding credits it won in the auction, placing them back in a pool to be auctioned off later.
One senior FCC official told The Post that the agency "was not in a position to determine if it was defrauded" at the time "and was hoping this action would set the record straight."
However, the official noted, "Dish had and continues to have well over $10 billion in revenue a year, and they set up shell corporations to receive FCC subsidies for companies with less than $50 million in revenue.
"It's inconceivable that the DOJ would move to dismiss it at the 11th hour without an ulterior motive."
"Dish had and continues to have well over $10 billion in revenue a year, and they set up shell corporations to receive FCC subsidies for companies with less than $50 million in revenue," a senior FCC official told The Post. AP
As the case progressed, Dish grew to become the fourth-largest wireless network in the US, thanks to the purchase of operators like Sprint. In September 2023, Dish reported net assets of nearly $54 billion.
Dish has committed to spend billions to build out a 5G network or see its wireless spectrums seized at the same time it is hemorrhaging TV customers — putting the business in a precarious position.
Speculation swirled that the broadcaster could file for bankruptcy this year, following an acquisition by EchoStar that left it "cash poor," one source noted, adding that an unfavorable judgment in the civil case could award damages of more than $6 billion.
Last year, Ergen acknowledged on an earnings call that "the debt market is essentially closed" to the company as its bond traded for as little as 30 cents on the dollar — an indication that investors believed it unlikely the company would pay its debt off. He even flew to Dubai last year in the hopes of tapping into Middle East sovereign wealth funds.
Other sources told The Post that Ergen has been "very close to the White House" throughout Biden's tenure, frequently "brags" about his connections, and has been spotted coming in and out of FCC headquarters.
Sources told The Post that Ergen has also been "very close to the White House" throughout Biden's tenure, frequently "brags" about his connections, and has been spotted coming in and out of FCC headquarters. AFP via Getty Images
"Dish is extremely good at navigating inside the Beltway," said Roger Entner, the founder of Recon Analytics, Inc. "They're very skillful. They have strong relationships on both sides of the aisle."
While Ergen has largely donated to Democrats, he's also thrown tens of thousands to more than a dozen prominent Republicans over the last few years — like Sen. Ted Cruz of Texas, Sen. Marsha Blackburn of Tennessee, and Sen. John Thune of South Dakota — all of whom sit on the Committee on Commerce, Science, and Transportation and have oversight of the FCC.
The Dish boss has also contributed to powerful Republicans like Sen. Chuck Grassley of Iowa and Sen. Mike Lee of Utah, who sit on the Senate Judiciary Committee and could make his life difficult if they wanted to investigate him or his business.
White House visitor logs show Ergen had at least three meetings with Biden officials, including an Oct. 16, 2023, sit-down with Kurt Campbell, then a deputy assistant to the president who now serves as deputy secretary of state.
White House visitor logs show the Dish founder had at least three meetings with Biden officials, including an Oct. 16, 2023, sit-down with Kurt Campbell, then a deputy assistant to the president. AP
This month, Ergen was also appointed to a presidential trade and investment mission to the Philippines after the White House announced a partnership with the nation for expanding access to 5G coverage more than a year ago.
Despite having angered the FCC in the past with its slow wireless buildout, Ergen has become potentially vital for the Biden-Harris administration's modernization efforts due to Dish's Open Radio Access Network (ORAN) technologies.
"ORAN provides them what they view as a more affordable option because it divorces the software and the hardware," one source said. "They don't have to rely upon proprietary technology to offer nationwide coverage."
"So Dish has been out there, you know, telling the White House and telling anybody, 'Well, listen, that ORAN is the greatest thing since sliced bread,'" the source added.
"And of course, that's exactly what the Biden administration wants to hear, and they want other countries to sing that same song. So there's a policy alliance, if you will, between Dish and the administration."
It's unclear if Ergen's political ties will be enough to provide a lifeline for his company.
Earlier this month Dish reported it lost customers and its revenues declined in the final quarter of 2023. It also acknowledged in a Securities and Exchange Commission filing that it "expects to use a substantial amount of cash" for debt payments and warned it's not sure how it will pay $1.98 billion in debt due in November.
"This raises substantial doubt about its ability to continue as a going concern," the filing acknowledged.
Jeff Blum, Echostar executive vice president of external and government affairs, told The Post in a statement that the "fraud claim has always been frivolous, and the DOJ was absolutely justified in moving to dismiss it."
"First, the FCC thoroughly investigated the allegations and found no misrepresentation or wrongdoing by EchoStar or its business partners. Then the DOJ gave VTel years to try to uncover evidence of fraud," Blum said.
"Despite the production of tens of thousands of discovery documents and countless depositions, VTel utterly failed to prove any fraud. And then last year, contrary to VTel's claim that the government was shortchanged, the government itself stated in sworn testimony that it was timely paid everythingthat was due."
Blum said the claim was "a desperate attempt by VTel and its lawyers to avoid having to pay millions of dollars in legal fees for this meritless case," adding that "EchoStar intends to pursue all possible legal remedies against VTel and its lawyers for their frivolous claims."
"It's a matter of record that EchoStar and Charlie Ergen have supported both Republicans and Democrats for many years," Blum added of the donations. "Because EchoStar has built the world's largest Open RAN wireless network, we have worked closely with policymakers on both sides of the aisle to bring back US leadership to telco and provide a real alternative to the dominance of Chinese vendors."
Neither the White House nor the Biden campaign responded to a request for comment. The DOJ declined to comment on pending litigation.
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Gee maybe making an campaign contribution is a way out of frivolous litigation.
No, there's nothing wrong with that.