That event was an $8 billion AUCTION - we were one of 18 winners. The previous airwave lotteries garnered $600M+ for my CLIENTS and a few million$s for me. The complete story overview is found below. zg
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INTERVIEW EXCERPT
Forbes magazine wrote an unflattering five-page article about you in 1995, entitled “The Grifter.” What’s your take on it?
Coincidentally, the publication release date was September 11, 1995, an inauspicious date in retrospect. The article made me out to be an unrepentant fraudster. They claimed that I once obtained a national list of Alzheimer victims and turned a sales force loose upon them with the simple pitch: “Where’s that money you were supposed to send?”
“Ouch! Bad Grifter…No No!” I playfully admonish him as we laugh together.
Forbes knew the story wasn’t true but they went to great lengths to establish that image for me while obfuscating the $600 million or so in investor profits that my airwave acquisition strategies produced and the tremendous lobbying effort that we carried on for nearly a decade on behalf of the independent wireless operators and licensees.
It all started in 1984, when one of my business associates brought to my attention a little-known lottery that had been announced by the Federal Communications Commission. The lottery would award cellular telephone company licenses. At that time I was already part of an informal national network of financial product and ‘tax shelter’ developers and distributors.
Owing to my background in card counting and advantage gambling, I was able to immediately recognize a ‘positive-expectation’ opportunity. After a series of meetings in Washington DC, with various technical and legal experts, I had mapped out the first of several statistical-based strategies for beating the FCC’s license awarding process. And simultaneously, by networking the independent investment sellers from coast to coast, we kicked off one of the most remarkable ‘land rushes’ ever. Within a few months we would come to level the playing field of America’s biggest telecoms, at least temporarily.
Initially, there wasn’t even an entry fee collected by the government - but each entry required a sophisticated application document of up to several hundred pages demonstrating the technical, business and financial qualifications of the applicant. A dozen of the largest US telecoms applied for the first sixty markets, each spending on average $300,000 per application. The dozen major applicants never saw a lottery on those first sixty markets because they all agreed to share, making the FCC happy not to hold the drawing - this was our inspiration.
We aligned with a high-caliber Washington DC-based technical and legal team that gave us a price of $50-100,000 per application, in volume. With immediate pre-construction values of $10 to $30 million per license, the FCC had essentially created a positive expectation game.
We figured out how to ‘spread the risk’ by boiler-plating (duplicating and individualizing) each of our applications 100+ times and reselling and filing them for our investors at $5,000 to $10,000 apiece. TV advertisements, featuring Philadelphia talk show host Mike Douglas, advised potential investors that “Ordinary citizens can now stand on equal footing with the nation’s biggest telecoms to vie for a piece of the multi-billion-dollar spectrum pie!” Each applicant signed an ‘alliance’ agreement to share each license no matter who won. Amidst allegations by the big companies and various government agencies of “fraud” by the “app-promoters” (us) and “insincere speculators” (our investors), some of our clients made as much as $20 million, while the average client realized a 400% return on investment. Our sales battle cry was, “The last great land rush is in the air!”
Certainly the big telecom companies didn’t appreciate what you had done, but what about the FCC?
No, the FCC didn’t appreciate us either, partially because we had increased their application-processing workload dramatically, from a few hundred cellular license filings total, to several thousand applications per month and climbing. We blitzkrieged them!
They enacted ‘countermeasures’ - rule changes intended to discourage the mass of unexpected small applicants. Most notably, they eventually outlawed the use of ‘intra-market’ alliances – risk-sharing agreements among competing applicants. Santa Barbara, for example, in which 220 out of 330 applicants for that territory belonged to such an alliance and enjoyed a 67% likelihood of success. As it turned out, our clients did win Santa Barbara and dozens like it, using that particular strategy, while at the same moment the FTC (Federal Trade Commission) was attempting to shut us down, saying on the US Circuit Court record that “There may be NO demand for cellular in small areas like Santa Barbara.” Ultimately, the Santa Barbara license alone fetched $30 million for our clients.
When the FCC outlawed the risk-sharing agreements they utilized no game-theoretic or statistical-logic expertise. They smugly announced that the new rule revisions would “stem the rising tide” of applications by rendering the opportunity a pure multi-hundred to one crapshoot. Before the ink was dry on their announcement we had begun offering shares in partnerships, each partnership to file in several hundred different license lotteries, thus obtaining the same statistical expectation without risk-sharing between competing applicants.
As I’ve said, these strategies generated over $600 million in profits for the thousands of small cellular investor-speculators who partook of our offering.
And in the process, turned the big telecoms and regulators against you?
Certainly did. This airwave land rush, or “spectrum-grab” was not unlike those of previous eras, replete with similar cast: “greedy land barons,” “earnest homesteaders,” and “gun-toting federal marshals” who were often in collusion with the “land barons.”
Along the way, my wife, and Adrian Cronauer of Good Morning Vietnam fame, and I would come to form a group of trade organizations in Washington DC that would not only become the biggest lobby of small wireless operators and licensees on the planet, but also file more FOIAs and challenges against the FCC than any group before or since, including the single largest US Court joint appeal in the history of the airwaves.
By the early ‘90s, we were going after FM radio station licenses, specialized mobile radio frequencies, which were eventually consolidated to become Nextel, and “wireless-cable” TV permits as well. And the FCC was playing increasingly dirty pool. Eventually the Forbes article would result as a backlash to our exposure of corruption between the FCC chairman and Hughes Electronics, which scuttled hundreds of our rural wireless-cable TV markets with a combined value in the billions.
So you were playing the big game in Washington DC, and were poised to become a wealthy wireless operator?
Yes, via wireless cable TV, a nascent industry that had the technological capability to take on the established coaxial cable business. Cheaper to build than conventional cable TV, wireless-cable uses license-allocated spectrum to transmit its cable programming via microwave from regional radio towers. We mapped out hundreds of rural markets that had poor or no cable TV service, and began mass-filing license speculators using the tools and strategies we had perfected in cellular - engineering the signal coverages, buildout schematics, and business plans as we rolled across the nation’s countryside markets planting the wireless-cable flag. Our ultimate plan was to capture the construction and operating contracts for the majority of three hundred mostly rural areas where we targeted the licensing - worth an aggregate $4+ billion.
Did you actually build any operating systems?
Yes, contrary to Forbes, quite a few including Palm Springs, Key West, Omaha, Atlantic City, and American and Western Samoa. We also precipitated substantial investment equities in operating systems in New Orleans; York, Pennsylvania; Madison, Wisconsin; Mobile, Alabama; Stowe, Vermont; and Nashville, Tennessee, to name a few, where we bought the licenses and equipment from Al Gore’s brother-in-law.
It seems like you were well on your way. How did you blow it?
In a nutshell, I was overbetting. I had used statistical-logic to crack the FCC lotteries, as well as game theory to both affect the regulatory process and to set bidding strategy in FCC auctions that ultimately superceded the lotteries. But I failed to take an adequate risk-of-ruin assessment as the stakes continued to rise. I was effectively betting millions while failing to appreciate the rising variance, which in part was due to ‘hidden’ opponents who were guarding their “sacred turf” surreptitiously.
Eventually, hundreds of our prime rural wireless-cable target areas would be thrown out by the FCC on bullshit technicalities, representing over 10,000 license filings and $100 million in application sales – and all the while, the FCC was publicly denigrating the quality of the application work product, insinuating that “boiler-room scammers” did the filings wrong, were “ripping off the gullible public,” etc.
But in actuality this was high quality technical work?
Oh, the highest quality. By then we were employing a dozen of the best technical and legal firms in America. In addition, we were spending millions on lobbying and rulemaking efforts, increasingly not knowing exactly who the enemy was.
So, in the final analysis, the game changed from a purely statistical exploitation to a more complex, multi-layered political and game-theoretic one. During this transition, more and more, I was overbetting while not cognizant of the identity and power of my hidden opponents, and the lengths to which they would go to stop us, as we progressively stormed the gates of the trillion dollar electromagnetic spectrum hegemony.
Did you ever identify your hidden opponents?
We managed to identify at least one big one: Hughes Electronics, a CIA ‘spook’ company, according to Roger Denton and Sally Harris in their definitive Las Vegas expose The Money and the Power, and parent of satellite-delivered ‘DirecTV.’ They conspired through a major DC law firm, along with the soon-to-be chairman of the FCC, to effectively scuttle our rural wireless-cable plans. Hughes had a multi-billion dollar investment in the launch of its DirecTV unit that would use rural America as its initial ‘launch-ramp.’ Had they not kiboshed our ascent through corruption of the licensing process, DirecTV would have been forced to compete in its infancy with hundreds of new microwave cable systems.
We identified the culprits as Hughes and the by-then new chairman of the FCC, and we proceeded to prosecute the biggest joint appeal in airwave history - which brought about the backlash of the Forbes article, the purpose and effect of which was to undermine my rising credibility, and to turn me into a ‘trophy-target’ for federal law enforcement. Forbes was a client of the same DC law firm that represented Hughes. Ultimately the FCC denied the lower-priced microwave-cable service to most of rural America, and DirecTV became a resounding success.
So you never sued Forbes for defamation and slander?
No. A lawsuit was prepared and slated for 1998 to coincide with Steve Forbes’ presidential primary bid, but it was pre-empted when the feds approached me and threatened to bring a twenty count indictment alleging fraud and racketeering. I might have beaten them on nineteen of the twenty counts, and still have wound up spending 8+ years at ‘Camp.’ My attorneys said that my case was strong, “a very strong trial defense,” but I also had to think of my loved ones. The feds threatened indictments against my wife and father as well. So I made a deal to plead to one count; “RICO-conspiracy.” While my operations were not “100% squeaky-clean,” my “crimes” would have been considered mere civil infractions, had we not been so in-their-face activist.
Some of the news clippings reveal that you cooperated with the Feds in
an ‘undercover’ capacity. What did that entail?
As part of a very creative plea-agreement, I created one of the most successful white-collar fraud ‘stings’ in law enforcement history. It was a fraudulent currency trading fund called the “UNEX-2000.” I crisscrossed the country, visiting crooked telemarketing rooms, using my notoriety as the “Forbes Grifter” to gain entry. These were expressly not rooms that had previously sold my airwave investments. Ultimately many crooked operations would be stung selling the fraudulent UNEX-2000 package, which was written and designed by me and printed at FBI headquarters in DC. Some of the operations that we stung were controlled by organized crime factions. My pitch to the boiler-room operators was: “We can make a lot of money by Christmas!” When ‘Operation Busy Signal,’ as it came to be named, was finally over, my nickname at the Department of Justice had become “The Grifter Who Stole Christmas.”
Operation Busy Signal netted boiler-room operators and brokers, attorneys, accountants, and even a now-former US Attorney. In all, the feds credited me with preempting nearly a billion dollars in future investment fraud directed primarily at retirement accounts.
The newspapers and Forbes follow-up article weren’t that descriptive, were they?
Well, that’s the media for you, but it’s all documented in a massive ‘Downward Departure Motion’ that the Justice Department submitted at my sentencing, and that’s why I’ll actually only be incarcerated for fourteen months, and at the proverbial ‘Club Fed.’
END EXCERPT
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