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Obama team sued for failure of Bush loan

Blamed in bankruptcy

- The Washington Times - Monday, August 20, 2012

Nearly a year after members of Congress called for an investigation into the collapse of a Colorado wireless company that went bankrupt after receiving a multimillion-dollar loan package from the George W. Bush administration, a trustee is suing the Obama administration over accusations that officials hastened the wireless firm's collapse.

In a complaint unsealed late last week, the liquidating trustee for Open Range Communications said the Federal Communications Commission (FCC) and the U.S. Department of Agriculture (USDA) were responsible for the company's bankruptcy.

Open Range won a $267 million loan guarantee in the waning days of the Bush administration, but it went bankrupt last year, owing more than $70 million to the government after federal officials cut off loan advances.

With Republicans last year investigating the high-profile collapse of Solyndra LLC — a California solar-panel maker that went bankrupt after winning a half-billion-dollar loan deal from the Obama administration — Democrats cited the Open Range case as an example of a big federal loan made under the Bush administration that also collapsed.

"The main distinction between the Solyndra guarantee and the Open Range loan appears to be that the Open Range loan was approved in 2008, when President Bush was in office," three prominent Democrats on the House Energy and Commerce Committee wrote to Republican colleagues last year.

But nearly a year later, a trustee in the company's bankruptcy case is faulting the Obama administration's handling of the loan. The trustee also filed court papers saying the agencies purportedly at fault coordinated at one point with the Executive Office of the President.

Open Range's plans originally called for providing wireless service in more than 500 rural communities in 17 states. The company planned to lease spectrum space from satellite provider Globalstar Inc., but the FCC later suspended Globalstar's license. In turn, the USDA cited Open Range's inability to find spectrum space in its decision to suspend loan advances.

"Thus, through no fault of Open Range, the United States, through the FCC, prevented Open Range from fulfilling its business plan … and then the United States, through the [USDA's Rural Utilities Service], denied Open Range funding on the basis of the United States' own conduct," attorneys for the trustee, Charles Forman, argued in recently unsealed court records.

The records, first reported by the online business news site Law360, also said the relationship between the USDA and Open Range went beyond a typical lender-and-borrower relationship, with the government employing a field representative dedicated to Open Range.

Mr. Foreman's complaint says that as finances worsened at Open Range, discussions took place involving the "USDA, FCC and/or the Executive Office of the President" concerning the search for spectrum space and the company's 2009 loan deal.

The purpose of those talks included "coordinating and mitigating adverse actions taken by the United States against Open Range so as to minimize political repercussions of an Open Range default … near the time of the November 2010 elections," according to Mr. Forman's complaint.

Filed in U.S. Bankruptcy Court in Delaware, the complaint seeks more than $20 million in damages.

Justin DeJong, a spokesman for the Rural Development office in the USDA, which handled the loan, referred specific questions about the complaint to the Justice Department, which is representing the government in the bankruptcy case.

A spokesman for Justice declined to comment, but officials are expected to file a response within a few weeks. The White House did not respond to an email Monday concerning the complaint.

In January, Open Range creditors told a judge that the government wasn't turning over information needed to investigate the company's collapse, including details from a meeting among FCC Chairman Julius Genachowski, Agriculture Secretary Thomas J. Vilsack and unidentified representatives from the White House, according to court records.

In an email Monday, Mr. DeJong noted that the Open Range loan was announced in 2008 and "finalized days before this administration took office."

USDA's Rural Utilities Service "interjected itself and had control over nearly every aspect of the project and Open Range's business plan," the trustee said in court papers.

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