A bankruptcy trustee and government lawyers have settled accusations that the Obama administration mishandled a multimillion-dollar loan awarded to a wireless company in the waning days of the George W. Bush administration, leading the business to go broke and lay off hundreds of workers.
The settlement comes months after the trustee filed court papers faulting the Federal Communications Commission and the U.S. Department of Agriculture for the collapse of Colorado-based Open Range Communications.
Open Range went bankrupt last year, owing taxpayers more than $70 million. The company closed on a $267 million federal loan guarantee in 2008 days before the Obama administration took office. Under the loan agreement with the USDA's Rural Utilities Service, Open Range was supposed to deploy broadband service in hundreds of rural communities in 17 states.
But after the company went bankrupt within a few years, trustee Charles Forman blamed federal officials for mishandling the loan and spurring the company's collapse.
Under the settlement, which still must be approved by a judge, the federal government would receive $1.75 million from an escrow account and more than one-third of whatever money the bankruptcy trustee receives from lawsuits against investors and former company officials, according to court records.
The trustee, who recoups money to distribute to creditors, would receive nearly two-thirds of any proceeds from his pending litigation against former Open Range directors.
The proposed settlement contains a host of other provisions and involves other outside entities with claims in the bankruptcy.
USDA officials declined to comment on the proposed settlement, which was filed recently by the trustee in U.S. Bankruptcy Court in Delaware, referring questions to the Department of Justice whose lawyers represent the department in the bankruptcy case.
Justice Department spokesman Charles Miller declined to comment other than to note that a hearing on the settlement has been scheduled for next week.
Open Range had bigplans four years ago. It was supposed to provide wireless service in more than 500 rural communities, but its prospects soon became entangled with those of satellite company Globalstar. The company had a deal in place to lease broadband spectrum from satellite company Globalstar, but the FCC later suspended Globalstar's license. In turn, the USDA cited Open Range's inability to find spectrum space when it began suspending loan advances to the company, according to court papers.
"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 argued in court filings.
Mr. Forman's complaint also argued that as the money troubles at Open Range grew worse, talks involving the USDA, FCC and White House took place to minimize any political repercussions if the company went broke around the November 2010 elections.
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