T-Mobile Sues WCO Spectrum for Allegedly Artificially Inflating Spectrum Leasing Prices for Profit

WASHINGTON, June 7, 2023 – T-Mobile is alleging in new court documents filed in a California court on June 2 that WCO Spectrum has engaged in a “nationwide criminal scheme to defraud T-Mobile and its subsidiaries” by artificially inflating prices it pays to lease spectrum from educational institutions.

T-Mobile leases the right to use certain spectrum bands from educational institutions that hold Federal Communications Commission licenses for the bands. The wireless carrier reserves the right of first refusal in most of its contracts which allows the company to match a third party offer to purchase a spectrum license and acquire the license itself.

The filing in federal court alleges that Gary Winnick, founder of WCO Spectrum, formed an illegal enterprise to make fraudulent offers to educational institutions to purchase spectrum licenses intended to raise T-Mobile costs. T-Mobile claims that WCO — which is described as a private investor in educational broadband service spectrum licenses — entered into “secret side agreements” with these educational institutions to pocket a portion of the price hike in the event that T-Mobile matched the third-party offer.

The side contract guaranteed that the licensee will pay WCO a portion, usually 10 percent, of the purchase price. According to T-Mobile, the WCO tried to hide its kickback arrangement by requiring the licensee to sign a non-disclosure agreement. The carrier said the scheme has cost it $10 million.

T-Mobile alleges WCO has, in total, offered the educational institutions more than $1.6 billion for 167 spectrum licenses. The carrier alleges that because WCO cannot follow through on that big of a purchase, it means it never meant those offers in good faith.

To support the scheme, WCO allegedly entered into a fake line of credit agreement with SCH LLC, T-Mobile said. SCH lends the appearance of legitimacy to WCO’s offers by purporting to lend WCO the funds needed to purchase the spectrum licenses, claimed T-Mobile.

In actuality, said T-Mobile, SCH’s line of credit is a farce as it does not have any apparent history, public presence, or lines of business. According to T-Mobile, SHC exists to create the illusion that WCO’s offers are backed by legitimate financing. T-Mobile claimed that SCH receives 8 percent of WCO’s kickback.

WCO did not respond to requests for comment.

Faced with the allegedly fraudulent offers, T-Mobile had to choose between spending vast sums of money to purchase spectrum licenses or risk the possibility that WCO would purchase the license and become T-Mobile’s spectrum landlord, “almost certainly guaranteeing that T-Mobile would have to pay a king’s ransom later,” the complaint said.

WCO had allegedly abandoned multiple deals rather than produce documents to T-Mobile that would have unveiled the alleged fraud, the carrier added.

A former insider of WCO and whistleblower alerted T-Mobile to the scheme, read the court filing. The whistleblower allegedly provided documents consistent with his claims and T-Mobile was able to obtain further documents which corroborate the whistleblower’s narrative, the carrier said.

In one instance WCO actually signed a contract to purchase a license subject to a T-Mobile lease, which T-Mobile claims is “simply an example of WCO taking steps to cover up its scheme.” The deal happened soon after the whistleblower surfaced and WCO learned T-Mobile was aware of the scheme, it said.

T-Mobile says the alleged fraud violates the Racketeer Influenced and Corrupt Organizations Act and California Unfair Competition Law.

“At their core, defendants are fraudsters whose racketeering and unfair and deceptive conduct is precisely the type of behavior that the RICO and UCL statues were designed to redress,” read the filing.