The Justice Department is expected to recommend dropping a fraud lawsuit which implicates Dish Network as early as this Friday, according to sources with the FCC. This proposed dismissal comes just before Dish’s CEO and Democratic donor Charlie Ergen and executives at BlackRock were scheduled to be deposed.

The case goes back to a 2015 FCC Spectrum Auction for valuable bandwidth that could be used for wireless internet. To promote competition, the FCC issued a 25 percent discount called “bidding credits” to “very small businesses” which averaged below $15 million in revenue over the previous three years. Between 2011 and 2014, Dish’s revenue ranged from $13.5 to 15 billion. Nonetheless, Dish, with backing from BlackRock, financed two ostensibly small companies Northstar Wireless and SNR Wireless, which went on to win the auctions, with discounts worth over $3 billion. 

SNR and Northstar acknowledged the financing, but certified they had total independence. An FCC inquiry later found “persuasive...evidence” that the two companies served “as arms of Dish,” which had “de facto control.” The FCC, under Ajit Pai, doubted “these companies are, or could ever become, truly independent enterprises” and revoked the credits in 2020. 

A senior FCC official familiar with the process tells me, “multi-billion dollar corporations setting up shell corporations to get subsidies designed for ‘very small businesses’ demands serious scrutiny in court.” This scrutiny comes in the form of a qui tam suit filed by Vermont National Telephone Company, which lost the auction to Dish and its financed “very small businesses.” Qui tam actions are filed by private parties on behalf of the U.S. Government, which will recover the bulk of defrauded money under the False Claims Act. Both the Justice Department and FCC supported the lawsuit, noting there was “a substantial interest in any discovery produced in this case that relates to Defendants’ alleged failure to disclose material facts to the Commission.” 

After years of procedural and technical wrangling, a federal district court judge dismissed the case in 2021 arguing fraud had not been properly alleged and the government was not harmed. However, last November, the U.S. Court of Appeals for the D.C. Circuit unanimously reversed and reinstated the case. The three-judge panel unanimously held that the applications “contained false certifications that Northstar and SNR had disclosed all agreements, arrangements, and understandings related to the licenses” made a viable case for fraud. 

The case was set to begin trial in February with both Charlie Ergen as well as representatives for BlackRock set to testify under oath. This was delayed; just as the trial was set to begin, the Justice Department informed the parties and the FCC that it would seek to dismiss the case and let Dish and its shell companies off with no penalties. 

Alluding to this case and others like it, Senator Chuck Grassley (R-IA) wrote a letter to Attorney General Merrick Garland on Wednesday noting concerns “that the Justice Department, after initially declining, will intervene and dismiss during the late stages of litigation after the relator has spent years and resources litigating the case.” He noted this was both a waste of resources and at odds with the False Claims Act’s purpose of “empower[ing] private citizens to help the government fight and deter fraud.”

“I’ve never heard of a party in any case—government or private—to back down just after a favorable ruling. It’s usually the losing party that begs for an easy settlement,” the FCC official added. Ergen and his wife are major Democratic donors, which has been widely speculated to be a cause for the favorable treatment of Dish by past Democratic administrations. Additionally, while emphasizing he has no first-hand knowledge, the FCC official speculated that Dish’s fights with SpaceX over spectrum may have influenced the decision. SpaceX’s Starlink and Dish have been in a protracted fight over an unrelated spectrum dispute. Musk tweeted “Charlie Ergen is trying to steal the 12GHz band meant for space Internet. Not cool.” 

The FCC is an independent agency, and ultimately ruled against Dish on that issue. “The Biden Administration has almost universally sided against Elon Musk’s businesses over the last year.” While it could not fully control FCC’s ruling on Starlink, “if the DOJ protects Dish from the fraud lawsuit—this could sidestep the FCC to harm Starlink,” the official speculated. 

While the reason remains undeclared, the Justice Department is inviting speculation by reversing its position and dropping a case implicating a prominent Democratic donor on the eve of trial.