Falcone Fires Back At Grassley, Accusing Senator Of Fudging Facts

Feb 2 2012 | 4:27am ET

The gloves are off in the battle between Harbinger Capital Partners and Sen. Charles Grassley (R-Iowa).

A lawyer for the hedge fund blasted the ranking Republican on the Senate Judiciary Committee, a week after Grassley suggested that Harbinger had offered improper inducements to get him to drop his investigation of LightSquared, the wireless Internet venture that Harbinger is backing. In a letter to Harbinger founder Philip Falcone, Grassley suggested that Falcone and intermediaries offered a quid pro quo for the senator's support and made "an implied invitation to pull punches in my investigation."

Those allegations are "unsupported" and based on "selective excerpts," Mark Paoletta wrote. Indeed, Grassley's own evidence offers plenty of reasonable, non-quid pro quo explanations, and his story is so full of untruths as to create questions "about the fairness of [Grassley's] inquiry into LightSquared."

Grassley is investigating the Federal Communications Commission's decision to grant a crucial waiver to LightSquared, which government tests show interferes with global positioning systems.

Sen. Charles GrassleySen. Charles GrassleyAt the heart of Grassley's allegations is a phone call from a Todd Ruelle apparently offering a Grassley staffer a call center in Grassley's home state if the deal goes through. But Paoletta writes that LightSquared doesn't plan to have any call centers. Worse still, Grassley's story doesn't hold up.

"Your letter also states that your staff member 'immediately' told Mr. Ruelle that his comments raised red flags and that he should cease any further contact with your office," Paoletta wrote. But just a half hour after the questionable phone call, "your staff member sent an e-mail to Mr. Ruelle stating, 'Thanks for the phone call—here's my e-mail address, let me know what time/day works best for you.'"

"This response demonstrates that your staff member did not think Mr. Ruelle said anything inappropriate in their conversation," Paoletta wrote. "The e-mail regarding red flags and the request that Mr. Ruelle cease contact with your office was sent by your staff more than a half-hour after that encouraging e-mail."

Paoletta also took issue with Grassley's apparent attempt to smear Harbinger in the press.

Less than a week after asking Falcone's lawyer about his relationship with Ruelle, LightSquared "received a call from a reporter at Bloomberg News with information that your staff had contacted him suggesting a story related to an alleged quid pro quo involving a purported request that you drop the investigation of LightSquared in exchange for a call center in Iowa."

"It concerns me," Paoletta wrote, "that Senate staff would propose such an unsubstantiated story without giving Harbinger and LightSquared an opportunity to address the allegations, especially as your office's version of the story ties together Mr. Ruelle's action sand those of Mr. Falcone despite a lack of evidence supporting such a tie."

In a separate letter, Ruelle, whom Paoletta said has no contractual relationship with Harbinger or LightSquared but who occasionally offers advice to Falcone, called Grassley's letter "erroneous" in a letter of his own to the senator.

"The problematic presentation of events and conclusions in your letter, coupled with the fact that your staff suggested prematurely to Bloomberg News that they run a story based on them, have reinforced our concerns about the fairness of the inquiry into LightSquared," Paoletta concluded.

Grassley brushed off the Harbinger broadside, saying through a spokeswoman that his letter "is accurate and fully reflects the contact to his office."


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