By Brendan Sasso and Kevin Bogardus - 05/30/12 09:00 AM EDT
Wireless startup LightSquared has laid off nearly half of its workforce and filed for bankruptcy, but isn’t parting with its extensive network of Washington lobbyists.
Philip Falcone and his investment firm, Harbinger Capital Partners, invested billions of dollars in LightSquared’s plan to build a high-speed wireless network that would have served more than 260 million people, but federal regulators denied it permission to launch in February over concerns that it would interfere with GPS devices.
The company spent more than $2.8 million on lobbying in 2011, according to records, roughly quadrupling 2010’s total of nearly $700,000.
But the lobbying offensive wasn’t enough to get LightSquared’s network proposal past regulators. The company announced plans in February to lay off nearly half of its 330 employees, and filed for bankruptcy in May.
Despite the financial troubles and staff cutbacks, LightSquared has yet to disband its lobbying army — an implicit acknowledgment that the company’s future is contingent upon what happens in Washington.
John Scofield of Shockey Scofield Solutions said his firm would still be lobbying for LightSquared.
“We are proud to be part of the LightSquared team and look forward to helping them successfully navigate the regulatory and political process to deploy its nationwide broadband network,” Scofield said. “LightSquared’s voluntary Chapter 11 filing was necessary to preserve the value of LightSquared’s business and to enable continued operations. We have not and will not let up and expect to be successful in the end.”
LightSquared is still looking for ways to salvage its network. When it filed for bankruptcy, the company released a statement saying the move was intended to give it “breathing room” from creditors to continue working on ways to launch its 4G network.
The company has suggested technical fixes could solve the GPS interference problem, and floated the idea of switching to new wireless frequencies farther away from those used by GPS devices.
A source close to LightSquared said the company needs to keep up its K Street spending to fight GPS companies that have been lobbying against their network. GPS companies including Trimble and John Deere have formed their own group, the Coalition to Save our GPS, to urge regulators and lawmakers to block LightSquared.
“If they lay down and quit, there’s no telling what may happen,” the source said.
The source said that the company’s lobbying efforts have “basically not changed” since the bankruptcy filing. The source has seen “no evidence of mass terminations or cutting back” on advocacy spending, and predicted that the company won’t significantly scale back on lobbying until it makes it through the bankruptcy process.
Nonetheless, LightSquared has canceled lobbying contracts with at least two firms, the Podesta Group and Ballard Spahr, according to termination reports filed last quarter. Podesta reported ending work for LightSquared on March 3, while Ballard Spahr reported ending work on Feb. 29.
The startup also cut off its contract with public-relations powerhouse Burson-Marsteller.
Several lobbying firms did not return requests for comment when contacted for this piece.
Other lobbyists, including former Rep. Jim Walsh (R-N.Y.) of K&L Gates and former Rep. Bob Walker (R-Pa.) of Wexler & Walker Public Policy Associates, referred questions to LightSquared when asked about their firms’ representation of the company.
LightSquared declined to comment.
Some Republicans have questioned whether LightSquared’s dozens of lobbyists inappropriately influenced the White House and the Federal Communications Commission (FCC).
Sen. Chuck Grassley (R-Iowa) held up President Obama’s two nominees to the FCC for four months in a bid to force the agency to turn over its internal documents on the company.
In a speech on the Senate floor last week, Grassley accused the FCC of not taking the GPS interference problem seriously until late in the review process.
“It seems strange that a project that was so obviously flawed was allowed to go so far, but LightSquared had help,” Grassley said, pointing to the lobbyists.
House Republicans have launched their own investigation into the FCC’s review of the company.
In its bankruptcy filing, LightSquared listed the holders of its 20 largest unsecured claims. That list included Boeing, to which it owes $7.5 million, and Alcatel-Lucent, which it owes $7.3 million.
Also on that list was Burson-Marsteller, which LightSquared owes nearly $265,000. Another $20,000 is owed to Mehlman Capitol Strategies, along with $35,000 to Shockey Scofield.
Paul Cordasco, a spokesman for Burson-Marsteller, said the firm is going through the “normal channels” to recover its money, but declined to specify whether that would include filings in LightSquared’s bankruptcy proceeding.
Now that the company has filed for bankruptcy, some of the decisions about which bills to pay will be up to the judge, though the source close to LightSquared said the firms will not be left out to dry.
“I don’t anticipate there are going to be problems with payment,” the source said.