WASHINGTON-“That peculiar smell drifting up from Puerto Rico is the odor of burning money. Our money. I’m tired of smelling it,” wrote Gary North Nov. 8 to other limited partners whose holdings are in limbo while PCS 2000 Inc. C-block personal communications services licenses remain with the Federal Communications Commission. “It’s time for a formal meeting of the limited partners … We must meet by Dec. 31.”
North hopes many of the 1,641 limited partners will attend his Dec. 14 meeting at the University of Texas in Irving. A preliminary discussion of the situation is scheduled for the morning, followed by a more formal meeting.
North also enclosed a proxy statement in case members could not attend and a form letter for members to send to SuperTel Communications Corp., PCS 2000’s new general partner. RCR also has been told that Javier Lamoso, president of SuperTel, may schedule a counter-meeting on the same date in Chicago, and that SuperTel sent a letter to all limited partners Nov. 18 that charged North with “fraud and illegal behavior.”
North, a Christian financial newsletter editor who owns three units of PCS 2000 valued at $75,000, wrote a glowing recommendation of the C-block bidder while it was searching for start-up funds. When PCS 2000 later was charged with a bidding error and two petitions to deny its licenses were filed, general partner president Lamoso sent North a thinly veiled warning not to print anything negative about PCS 2000 that would jeopardize its position with the FCC.
North, along with many other investors, now are worried about the status of their $50 million-plus upfront money and about a capital call for additional funds put out by PCS 2000 general partner SuperTel Communications Corp., based in Old San Juan, Puerto Rico. SuperTel, according to North, has been spending exorbitant amounts in legal and travel fees. North and other investors want answers to their questions, many of which have been pending for months.
In his letter, North contended that the new general partner that replaced the original PCS 2000 general partner Unicom Inc. last June was voted in without the approval of the limited partners, apparently in violation of the partnership agreement. In fact, such a major management shakeup could be in violation of FCC rules regarding changes in ownership and control after auction bidding has begun, and SuperTel submitted a waiver request at the same time it submitted the change in hierarchy. The commission has not ruled on this request, which probably will be addressed at the same time as the final decision regarding PCS 2000’s licenses.
Because the general partner has spent nine times the amount of money in the first six months of 1996 on legal fees than it did during the same period in 1995, according to North, he questioned where the capital call money, which was due Nov. 15, will be spent; he also wondered how one law firm paid by SuperTel could have run up a bill totaling $440,023 in six months. North also put forth that the new general partner has spent $146,686 on travel in 1996, when only $5,578 was spent during the previous year.
Although the FCC continues to ruminate over PCS 2000’s final fate, North is optimistic that the decision will be positive. “Lawyers don’t do highly questionable things in secret to get a larger piece of the action if there’s not big money at stake,” he wrote. North also mentioned a $54 million agreement the general partner supposedly signed with manufacturer L.M. Ericsson, which he said was a loan to build PCS 2000’S system, and he intimated that such a well-known company would not be doing business with a carrier that was about to go under. Kathy Egan, vice president of communications for Ericsson Inc., denied that any contract had been signed with PCS 2000 or its agents, although she did say that talks had taken place.
If the commission denies PCS 2000’s licenses, North brought up the specter of the general partner using the limited partners’ $13 million capital call to pay legal fees.
Prominent in the North letter are references to SuperTel’s treatment of SDE Trust, the largest shareholder of the former general partner Unicom. The assets of that trust, North wrote, were handed over to Richard Reese, SuperTel’s new chief financial officer, as part of an unsecured note given as payment for Unicom. North added that SDE Trust, headed by Susan Easton, wife of former Unicom and Romulus Engineering principal Anthony Easton (who currently is under investigation by the FCC regarding his role in PCS 2000’s bidding error) will file suit against SuperTel this month, alleging fraud. “Will any of our $13 million capital call be used by the General Partner to fight this lawsuit,” he asked. North reportedly is close friends with the Eastons, and his opinions mirror those contained in previous documents submitted by SDE Trust to the FCC.
Theresa Miller, head of investor relations at SuperTel, would not comment on either the results of the capital call or on North’s or Lamoso’s pending limited-partner meetings.
North did not reply to a request for an interview.
