April 5, 2001

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FCC official urges probe into DT-VoiceStream deal

by Jaret Selberg Posted 05:50 PM EST, Apr-4-2001

WASHINGTON - Federal regulators have been asked to investigate an apparent effort to manipulate Deutsche Telekom AG's acquisition of VoiceStream Wireless Corp.

Federal Communications Commission member Gloria Tristani and Sen. Ernest Hollings, D-S.C., have each called for an inquiry of letters attributed to their offices that may have been delivered to some in the investment banking community.

The letters question If the FCC should approve the merger, which was initially valued at $50 billion. They appeared just as the FCC's Internal timetable for considering the deal Is set to expire Friday.

Tristanl and Hollings have said the letters are frauds. -Neither I nor any member of my staff has sent a letter to Sen. Hollings regarding the transaction,- Tristanl said In a statement. -I am deeply troubled that the commission's process is being used for deceitful purposes, and I have asked the chainnan to initiate a full Investigation of this matter and to refer it to other federal agencies as appropriate.-

An official in Hollings' office said neither the senator nor any of . his staff has sent a letter to Tristanl concerning the DTVoiceStream deal. A VolceStream spokeswoman declined to comment.

VoiceStream's stock fell 8% Tuesday before regaining all the ground Wednesday. The drop was attributed to a misinterpretation of comments by a Wall Street derivatives trader. Yet it now appears the fraudulent letters also could have contributed to the markers perception that the deal was in trouble.

A source said the first letter is addressed to Hollingd office and purports to come from Tristani's office. It alleges there was opposition at the FCC to the deal. The second letter is the alleged response from Hollings' office demanding the FCC not act on the merger until the senator could introduce legislation blocking the transaction.

The letters could, at first blush, appear genuine. Hollings is a fierce critic of the blockbuster cross-border merger, arguing that it is inappropriate for a company that is more than half owned by the German government to buy U.S. telecommunication assets. Also, Tristani has in the past challenged mergers under the FCC's public interest standard.

Lawyers said the author of the letters, if caught, could face up to 10 years in jail and a $1 million fine for securities law violations alone, as well as charges of Impersonating a federal official.

"Manipulating the price of a security by pumping out false information constitutes securities fraud and can be punished both civilly and criminally," said Richard A. Levan, of Levan Friedman, LLP.