- Two whistleblowers contend that UScellular used a sham business to obtain discounted spectrum licenses
- A court on Friday reversed a lower court decision, saying the case can move forward
- The allegations are similar to those levied against Dish when affiliates acquired licenses in the AWS-3 auction
A court on Friday ruled in favor of whistleblowers who contend UScellular improperly obtained bidding credits for spectrum licenses acquired in 2015.
Earlier, a federal district court determined that the whistleblowers, Sara Leibman and Mark O’Connor, didn’t satisfy requirements of the False Claims Act’s public disclosure bar. Generally speaking, the bar prevents whistleblowers from pursuing fraud claims based on the same allegations as ones that have already been publicly disclosed.
The Circuit disagreed and reversed the district court’s decision, saying the whistleblowers adequately established that they qualify as original sources, paving the way for the case to proceed.
“We are very pleased the Court of Appeals has recognized the merit of our case against U.S. Cellular and will allow our fraud allegations against the company to proceed in the lower court,” Leibman and O’Connor said in a joint statement provided to Fierce.
Fierce reached out to UScellular’s parent company, TDS Telecom, as well as T-Mobile, which acquired UScellular licenses earlier this year, for comment and will update this article if we hear back.
Leading up to the closure of T-Mobile’s $4.3 billion acquisition of UScellular’s wireless assets and some of its spectrum licenses, the companies argued that the concerns raised by O’Connor and Leibman were unrelated to the transfer of customers and certain spectrum licenses from UScellular to T-Mobile.
AWS-3 reauction
The whistleblowers’ objections in the UScellular case are similar to problems raised when Dish Network acquired spectrum through designated entities (DEs) in the 2015 AWS-3 auction. It just so happens that Leibman worked as an attorney for the Federal Communications Commission (FCC) from 1991 through 1995, when the FCC was developing DE and other FCC spectrum auction regulations, making her well acquainted with the FCC’s motivation behind DEs.
The FCC provided bidding credits to DEs in an effort to help small companies and new market entrants obtain spectrum. The rules required DEs to show they were independent companies and not entities set up by larger companies to buy spectrum on the cheap.
In Dish’s case, Northstar Wireless and SNR Wireless won licenses that entitled them to $3.3 billion in bidding credits. However, after the auction, the FCC determined that under the agreements with the parties, Dish possessed de facto control of the DEs. Dish was levied a $515 million fine and forced to give 197 licenses back to the FCC.
The FCC is expected to hold an auction of those licenses before June 23, 2026, but Dish parent company EchoStar is suing because the auction rules, adopted in July, could place it on the hook for billions of dollars in penalty payments. The suit was filed in the Tenth U.S. Circuit Court of Appeals in Denver.