Falcone-backed telecom hires top Democrat to lobby

Thu Mar 31, 2011 5:36pm BST

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* LightSquared inks lobbying deal with ex-Gov. Edward Rendell

* Former Pennsylvania governor is now a law firm partner

* Falcone's telecom increasing lobbying spending

By Matthew Goldstein

NEW YORK, March 31 (Reuters) - Billionaire hedge fund manager Philip Falcone's upstart wireless telecom investment recently hired former Pennsylvania Governor Edward Rendell as a lobbyist.

Rendell, a prominent Democratic politician and a political commentator for the cable news channel MSNBC, registered last month as a lobbyist for LightSquared, a Virginia-based company that is backed by Falcone's $6 billion Harbinger Capital Partners hedge fund.

The former Pennsylvania governor is now a partner with the law firm Ballard Spahr. Adrian King, who served as Rendell's deputy chief of staff and also is a partner at Ballard Spahr, is also registered as a LightSquared lobbyist on a federal government website.

Rendell and King join a growing list of paid lobbyists with political connections to both Democrats and Republicans who are doing work for LightSquared.

Anyone taking a fee to lobby federal officials is required to register with the clerk's office of the U.S. House of Representatives and disclose their clients.

The telecom company is beefing up its lobbying at the same time it is trying to fend off complaints from the U.S. Department of Defense about potential interference problems with LightSquared's planned wireless network. The Defense Department and other government agencies are concerned that LightSquared's high-speed mobile communications network will create interference problems with global positioning systems used by the military and the aviation industry.

So far, Rendell, whose office declined to comment, has not disclosed doing lobbying work for any firm other than LightSquared. During his tenure as governor, Rendell served as chairman of the National Governors Association. Shortly after President Barack Obama was elected in November 2008, some in Washington, D.C., had speculated that Rendell might be offered a position with the new Democratic administration.

Falcone, whose Harbinger partners has sunk some $3 billion into LightSquared and owns most of the fledgling telecom, declined to comment. A LightSquared spokeswoman, Audrey Schaefer, said, "Governor Rendell has been a strong advocate for increasing American investment in our infrastructure and we share those values with him."

In 2010, LightSquared paid $265,000 in fees to three firms to lobby for it in Washington, D.C., according to the Center for Responsive Politics' website Opensecrets.org. Rendell's law firm, Ballard Spahr, did not do any lobbying work for LightSquared last year.

The increased lobbying activity by LightSquared is notable given the company's rather small size. The amount spent by LightSquared on lobbying fees in 2010 is comparable to the $285,000 that wireless competitor Clearwire Corp CLWR.O. paid to lobbyists, according to Opensecrets.org.

The uptick in lobbying comes at a time that it is trying to sign up potential customers and deal with concerns about the potential interference caused by its planned network.

On March 25, Deputy Secretary of Defense William Lynn and Deputy Secretary of Transportation John Porcari sent a joint letter to the Federal Communications Commission raising concerns about the "inclusiveness" of a study group LightSquared has put together to review the interference issues. The FCC, which last year approved LightSquared's plans to provide high-speed wireless communications to all corners of the United States by 2015, authorized the study group earlier this year.

LightSquared is trying to position itself as a low-cost alternative to the big wireless operators like Verizon Communications Inc (VZ.N) and AT&T (T.N), which recently proposed a $39 billion deal for Deutsche Telekom AG's (DTEGn.DE) T-Mobile USA. LightSquared recently announced deals with Best Buy Co (BBY.N) and Leap Wireless International LEAP.O.

For Falcone, LightSquared has emerged as his hedge fund's single biggest bet. A little more than half of Harbinger's assets are committed to LightSquared and some of his hedge fund investors have grown uneasy waiting for the telecom bet to pay off.

Bankers with UBS UBS.N, which helped LightSquared raise more than $1 billion in short-term financing, are telling prospective investors and telecom industry analysts that LightSquared could be worth more than $10 billion when its wireless network is built out, said several people familiar with the hedge fund and the telecom industry. (Reported by Matthew Goldstein, editing by Dave Zimmerman)

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