Object lesson #1: Steven Davidoff Solomon's DealBook column in today's New York Times, on "How loopholes turned Dish Network into a 'Very Small Business'".
As Solomon explains, the Treasury is about to receive more than $40 billion from the auction of wireless spectrum. Yay, us! Alas, that sum is also about $3.25 billion less than it should be, because Dish Network, a satellite TV provider, bid for those wireless licenses "through a newly formed vehicle that claimed to be a 'very small business' under the Federal Communications Commission rules and was entitled to a 25 percent discount."
Hunh, you say. Solomon understands:
At this point you may be scratching your head. How can Dish, a company with a $34 billion market value, be a "very small business"? Indeed, to qualify for the discount, a very small business must have revenue not "exceeding $15 million for the preceding three years." Dish in its last full fiscal year had almost $14 billion in revenue.Millions, billions, it's all the same, right? No, of course not. So how did Dish manage this sleight of hand?
I won't take you through the whole sequence that Solomon lays out, complete with gory details, involving an "Alaska Native regional corporation" and a "former chief of the FCC's wireless telecommunications bureau". Even my eyes glazed over. Suffice it to say, it does appear to have been a completely legal process.
No doubt Dish and its lawyers are high-fiving one another and patting themselves on the back.... [With these maneuvers,] they have saved themselves billions.Well, what's wrong with that, you may ask. After all, weren't the lawyers doing exactly what they're paid to do -- crafting the best possible deal for their clients?
Taxpayers, however, may want to ponder what those billions of dollars could have done in the coffers of the government -- a new bridge or money for schools, perhaps.Might this be the moment to remind Charles Ergen (the billionaire who controls Dish Network) that he too is a U.S. citizen. And that by cheating the government of that $3.25 billion, he was really cheating all of us -- including himself.
Solomon adds that
The "small firm" exemption has been know to be a problem at the FCC for years. The Congressional Budget Office in 2005 wrote a report highlighting how it was used mostly by big companies instead of the small firms it was intended to benefit. Moreover, the office found that the program provided little benefit to consumers while providing a big discount to companies.And yet... nine years later, nothing has been done to close that loophole. Wonder why so many of us are cynical about big corporations, high-priced lawyers, and government officials?
Legal, yes. Ethical, not even close.