Telecom chief could face conflict issues

Introduction

A key Commerce Department official could face frequent conflict-of-interest issues because her office controls high-tech policies that affect a number of telecommunication and wireless firms for which she and her husband have worked.

As the new assistant secretary of commerce for communications and information, Nancy J. Victory also serves as chief of the Commerce Department’s National Telecommunications and Information Administration. NTIA is responsible for a number of key policy issues affecting telecommunications companies, including what is known as “spectrum management.”

Meanwhile, her husband, Michael Senkowski, remains the lead telecom and Internet partner at Washingtons premier communications law and lobby firm, Wiley Rein & Fielding, where Victory was also a partner. Many of the firm’s largest clients are keenly concerned with how the Bush administration chooses to address spectrum management issues.

According to a federal conflict-of-interest statute regarding personal financial interest for employees of the executive branch, an employee who “participates personally and substantially as a Government officer or employee” in a “particular matter in which, to his knowledge, he, his spouse, minor child, general partner . . . has a financial interest,” can be subject to criminal penalties, says Title 18, U.S. Code, section 208.

There are a number of ways by which Victory or any political appointee can avoid such penalties, including making the government agency aware of personal financial interests and being cleared by the agency should those interests prove unlikely to affect the integrity of the person’s decisions.

In addition, Senkowski, a member of the District of Columbia Bar, might violate conflict-of-interest rules set by the bar, as his and his firm’s clients could be heavily affected by federal legislation on spectrum issues about which his wife will be advising.

The bar’s conflict-of-interest rule states that a lawyer shall not represent a client if “the lawyer’s professional judgment on behalf of the client will be or reasonably may be adversely affected by the lawyer’s responsibilities to or interests in a third party or the lawyer’s own financial, business, property, or personal interests.” It is possible that the rule would apply to Senkowski if, for example, a client were considering suing the Commerce Department. But the lawyer may be excused from this rule if the client agrees to representation after being made aware of the potential conflict.

Senkowski, a managing partner at Wiley Rein & Fielding, heads its telecommunications and Internet practices. According to his corporate biography, Senkowski has handled regulatory approvals for more than 150 telecommunications transactions. He has given presentations on wireless and telecommunications issues, including one in December 2000 to the communications and wireless company Mitel involving the future of U.S. regulation under the Bush administration.

He could not be reached for comment.

Divested herself of stock holdings

Victory said at her Aug. 1 Senate Commerce Committee confirmation hearing that she had divested herself of sizable stock holdings in Verizon Communications and Motorola, each worth between $15,000 and $50,000, and in AT&T, worth up to $1,000, according to her financial disclosure report.

After meeting with the U.S. Office of Government Ethics and signing an ethics agreement with the Commerce Department, Victory pledged to sell her shares in the telecommunications company stocks or put them in blind trusts within 90 days. She said she would also recuse herself when Wiley Rein & Fielding was involved in matters before the department.

Further, at the Aug. 1 hearing, Victory said she would recuse herself in matters involving ultra wide band services, services that transmit very low power radio signals with very short pulses. Wiley Rein & Fielding had represented a manufacturer of ultra wide band technology, Time Domain, before the Federal Communications Commission. The technology has shown promise for many commercial applications, including wireless communications.

According to an NTIA spokesman, Victory is not accepting interview requests from the news media. But she said at the hearing, “I take ethics and the conflict-of-interest rules extremely seriously. . . . I have either implemented or promised to implement all of those directives from those ethics experts.”

Still, Jeff Chester, executive director of the Center for Media Education, saw the possibility of conflict-of-interest questions.

“On one side of the door, she was lobbying the government on behalf of the companies interests, and on the other side she will be making decisions on behalf of the customer,” Chester said.

D.C.’s largest communications lobbying practice

Wiley Rein & Fielding already has the largest communications lobbying practice in the District of Columbia. The firm is considered the city’s marquee lobbying shop for telecom and communications issues. It’s name partner, Richard Wiley, is a former FCC chairman and served on Bush’s transition advisory team on the FCC. Wiley Rein also represents major telecommunications and Internet companies such as Verizon, Motorola, and America Online.

Federal lobbying reports show that Victory herself has been listed as a registered lobbyist for several of Wiley Reins clients whose primary lobbying issues will be directly affected by her policy decisions as NTIA chief.

Those companies contend with a constant barrage of regulatory reviews from the U.S. government and could gain favorable treatment on some of today’s most controversial issues. Among them is “spectrum management,” an area directly affecting many of Victory’s and Senkowski’s lobbying clients, and one now regulated by Victory’s NTIA.

Wireless phone carriers such as AT&T Wireless, Sprint PCS, Verizon and Cingular have been pressing the government to allocate more electromagnetic spectrum for what are known as Third Generation (“3G”) products and services. The electromagnetic spectrum includes all visible light as well as infrared, ultraviolet, and radio and television wavelengths. Wireless data services and other advanced wireless applications typically occupy upper portions of the spectrum.

Wireless carriers tout 3G as the next generation of wireless revenue, which could include video services over phones, high-speed Internet and Web access over cell phones and personal digital assistants (such as Palm Pilots), and location-smart services based on the exact location of the wireless user. Such advanced services might require additional spectrum in order to be fully implemented.

Victory’s appointment comes as the NTIA and Federal Communications Commission are considering how to divide a highly coveted band of spectrum held by the Defense Department. The wireless industry, including the powerful Cellular Telecommunications Industry Association, which donated more than $780,000 in hard and soft money to federal candidates in the last election cycle, has argued that the Defense Department should give up its spectrum for 3G applications.

Jim Gerace, vice president for public relations for Verizon, said additional spectrum for 3G wireless would allow for higher speed data access and faster digital transfers, and result in lower consumer prices for wireless equipment.

“We are dangerously close to not having enough spectrum,” Gerace said. “The government has already taken too long with this issue. There is a limit to what companies can do.”

Lobbied on “general spectrum issues”

Federal lobbying records indicate that Victory was a registered lobbyist on several of Wiley Reins accounts that later included lobbying work on “general spectrum issues,” “spectrum license auctions” and “private spectrum allocation and assignment.”

Most notably, Victory was a registered lobbyist for wireless device giant Motorola, British telecom carrier Cable & Wireless, and the Personal Communications Industry Association, which comprises the largest wireless and Personal Communications Services (PCS) providers in the world. PCIA’s Web site describes one of its top public policy objectives as, “Supporting proactive policies that identify and reserve additional spectrum for 3G applications to be made available over the next 10 to 15 years.” Victory was registered to lobby for these spectrum-concerned clients in 1996 and 1997, though Wiley Rein has continued to represent them before the federal government (with the exception of Cable & Wireless, whose account was terminated in 1998).

Yet the rollout of 3G services around the world has been costly and slow, raising questions as to whether or not U.S. companies are truly at a disadvantage. In Europe, wireless carriers spent more than $1 billion purchasing 3G spectrum allocations in government-run auctions, yet none has introduced a significant amount of advanced services or products. Meanwhile, those same European telecom companies are suffering financially under the weight of the debt undertaken to purchase the 3G licenses, most notably British Telecom and Deutche Telekom. In Japan, where wireless giant NTT DoCoMo boasts the worlds most advanced and popular wireless data service (its popular “i-Mode” service counts more than 20 million subscribers), rollout of 3G has been delayed by at least six months. AT&T Wireless, which is 20 percent owned by DoCoMo, missed its target 3G rollout in the U.S. as has Sprint PCS, which pushed back its rollout to the end of 2001.

Before leaving office, President Bill Clinton ordered NTIA to study the spectrum management issue with regard to 3G and to assist in auctioning off U.S. 3G spectrum by September 2002. However, the FCC and the Commerce Department recently announced that the auction had been delayed indefinitely, due in large part to the fight between the Defense Department and the wireless industry.

On Sept. 5, Victory announced that the administration would soon send Congress legislation that would delay the auction for two years.