Justice takes lead in fraud suit against Gabelli

It looks like the Justice Department will pursue a civil fraud case against Mario Gabelli that alleges the money manager set up companies simply to receive bidding discounts for PCS licenses in past auctions and sell the licenses for a profit. The government decided to intervene in the case against Gabelli and others after a November court ruling said that only the government could recover unjust profits. The Justice Department said it reviewed the evidence gathered by the private parties who initiated the five-year-old lawsuit and concluded "they do have a compelling case." A judge must rule whether the government can join the case.

It doesn't look like the FCC will end bidding discounts for small and minority-owned businesses in the Advanced Wireless Services auction in July. The practice simply has not turned out the way the government had hoped. Instead of giving minority-owned and small businesses an equal footing in the industry, major operators have simply found ways to partner with smaller entities to receive the bidding credit and later buy out their partners. Supposedly, the FCC is considering tightening these rules. So what's the difference between what businesses that received credits and later sold to larger carriers did and what Gabelli did? They were at least independent for a while and didn't simply serve as fronts, as alleged in the Gabelli lawsuit. But both seem to circumvent the government's original intentions for such bidding discounts.

For more about the case against Mario Gabelli:
- check out this article from AP
- read this report from The Wall Street Journal (sub. req.)