Thanks, but no thanks: Verizon Wireless purchase of Alltel sparks lawsuit

So it was, according to a new intriguing lawsuit, that Verizon Wireless was approached via e-mail by an Arkansas businessman in early February about “an arbitrage opportunity” that could potentially accomplish the same objective as one announced months later when the No. 2 cellphone carrier announced a debt-heavy $28.1 billion purchase of Alltel Communications L.L.C.
According to Verizon Wireless’ lawsuit in New Jersey federal court, Walter Howard, president and CEO of Private Finance L.L.C., offered to guide the carrier in buying Alltel’s senior secured debt (then selling at a discount) in a way which might net the carrier a profit or even lead to acquisition of Alltel’s assets. Several hours after receiving Howard’s Feb. 7 e-mail, John Diercksen, executive VP for strategy, development and planning at Verizon Communications Inc., politely declined the offer.
In early June, Verizon Wireless announced plans to buy Alltel. Howard e-mailed congratulations to Verizon executives, and that was that. But it wasn’t. The matter would subsequently take a nasty turn.
According to the litigation and exhibits, Howard again e-mailed Diercksen and Verizon Wireless CEO Lowell McAdam on Aug. 30, this time wanting to discuss “a fair and reasonable compensation for the e-mail I sent in early February, which is obviously the basis for your acquisition of Alltel. I have copied my attorney whom this matter will be turned over to if I have not heard from one of you by early next week.” On Sept. 2, Gene Cauley, a hot-shot Arkansas lawyer representing Howard, signaled to Verizon Wireless General Counsel Steve Zipperstein in an e-mail that it was time to play hardball. “Let’s just save time and I will file the complaint. That will outline the factual evidence and legal support,” Cauley stated. Zipperstein replied that the carrier was “not aware of any legal basis for Mr. Howard’s claim.”
Verizon subsequently decided to strike first, filing suit in hopes of getting the court to declare that the carrier has no contractual obligation to Howard and his firm. The lawsuit characterizes the situation as “a brazen attempt to shake down Verizon to obtain an unjustified payment through the threat of litigation.” Verizon points to press reports dating back to February 2007 (a year before Howard’s e-mail) that Alltel – a CDMA carrier like itself – could command a hefty sum through a sale to private-equity firms or another cellular carrier wanting to expand into rural markets.
Howard and Cauley declined to comment. They are expected to file a formal response with the court soon. It could get messier still. It’s no better at the FCC and DoJ, which are analyzing roaming, antitrust and other issues raised by the controversial Verizon Wireless-Alltel deal.