Verizon Communications said the Federal Communications Commission's plan to give competitor Nextel Communications Inc. a swath of valuable spectrum in exchange for payments to broadcasters and firefighters is illegal, and chairman Michael Powell could be criminally liable if he signs off on the deal.
An FCC source characterizes the letter as a last-ditch effort to block the deal, which is slated to be released as an FCC order in the next week or so.
Verizon, which says Nextel should have to bid for the valuable spectrum along with everybody else, wrote FCC Chairman Michael Powell Monday that he could be criminally liable under federal law governing public officials' disposition of federal resources.
Verizon has argued before that the deal would violate Congress's prohibition, when authorizing spectrum auctions, on windfalls to private companies, but it is now leveling the more serious charge that the deal could make Powell a criminal. In the letter, Verizon says that federal law "imposes criminal liability on 'whoever...without authority, sells, conveys or disposes of anything of value of the United States or of any department or agency thereof." It suggests removal from office could be one of the penalties.
"It is no accident that Congress chose to employ the criminal law to police the fiscal accountability of public officials," wrote Verizon EVP and General Counsel William Barr, "Congress well understood that stewards of public resources could be exposed to relentless pressures to convert those resources to private gain. It therefore took stern measures, and aimed them directly at officials themselves, to ensure that they would not succumb to these pressures and instead remain true to the public trust."
Barr advised the FCC to run the deal's legality by the Office of the Comptroller General, and says several members of Congress plan to do so.
Nextel has offered to pony up about $1.4 billion to cover the cost of moving and outfitting broadcasters and emergency personnel (critics point out that the new spectrum Nextel would get without auction is worth $5 billion). That payment and the fact that Nextel's move to the new spectrum would speed the digital transition and decrease interference to those emergency crews made the plan attractive to Powell, who indicated last week a deal was imminent, though he reportedly said it would not be a windfall.
Verizon counters that such an arrangement illegally bypasses Congress' power of the purse.
The FCC had no official response to Barr's letter, but one agency source says that the deal has already been vetted by the Comptroller General's office. Suggesting the Verizon letter is a last-ditch ploy the source characterized it as "2 o'clock and the bar [or should that be Barr] is closing."