Mario Gabelli
Encyclopedia
Mario Joseph Gabelli is an American
stock investor, investment advisor
, and financial analyst
. He is the founder, chairman, and CEO of Gabelli Asset Management Company Investors
(GAMCO Investors) a $30 billion dollar global investment firm headquartered in Rye, New York
. Forbes
magazine's 2006 Forbes 400
rankings listed him as #346 on the list of wealthiest Americans and estimated his net worth
at $1 billion as of 2011.
In recent years, Gabelli has seen his reputation tarnished by a pair of scandals, as two high-profile lawsuits filed against his companies ended in combined settlements reportedly worth $230 million. He has also faced protests from his own investors over his large annual salaries.
Gabelli founded his firm in 1977 as a broker-dealer
, and the company has since grown into the diversified financial services corporation. Gabelli does not receive salary, bonuses, or stock options, but is paid a management-fee-based compensation. He was paid $55 million in 2004. His pay of $58.2 million in 2006 was "more than the pay of any senior executive of a major Wall Street firm" that year, despite the fact that he manages only a fraction of the assets of larger Wall Street companies. Gabelli was paid $45.9 million in 2008 at Gamco Investors, a 35% decrease compared to his 2007 compensation of $70.9 million.
Gabelli is a leading proponent of the Graham
-Dodd
school of security analysis and pioneered the application of Graham and Dodd's principles to the analysis of domestic, cash generating, franchise companies in a very wide range of industries. His proprietary Private Market Value methodology is now an analytical standard in the value investing
community.
Gabelli is a Chartered Financial Analyst
, a member and former officer of the New York Society of Security Analysts
, the New York Society of Auto Analysts and the Entertainment Analysts Group of New York.
Gabelli has been a frequent commentator on CNBC
and CNN
, and appeared six times on Louis Rukeyser's Wall Street
. Gabelli is often written about in the financial print media including Institutional Investor
, Business Week, Fortune
, Forbes
, Money
, and Changing Times. He has also written articles for investment publications such as the Financial Analysts Handbook and for the GAMCO blog.
and went to Fordham Preparatory School
there. He has said he read market reports for fun when he was very young and that he bought his first stock when he was 13 years old.
Gabelli won a scholarship and graduated from Fordham University
summa cum laude
. Fordham University has renamed their College Of Business Administration to the Gabelli School Of Business after a $25 million donation in September 2010. He received his Master of Business Administration
degree
from Columbia Business School
. At Columbia, he was taught by Roger Murray, noted value investing professor and co-author of the Fifth Edition of Security Analysis, The Graham & Dodd Value Investing Bible. Gabelli and his firm later launched the Graham & Dodd, Murray, Greenwald Award for Distinguished Value Investors. This award is presented yearly at his Annual Client Symposium.
as a farm equipment and auto parts analyst and later media and broadcasting. Gabelli was putting into practice the theory of value investing that he learned at Columbia. He rated companies not by earnings but cash flow, analyzing a firm in great detail to calculate what he called private-market value: not the share price at which a stock was selling on an exchange, but the price per share someone would be willing to pay in order to buy the whole company. This method would be widely used in the 1980s in leveraged buyouts, in which a public company's managers would buy their company, or at least a considerable part of it, and take it private. The calculations employed were often not the same as the standard valuation measures for public companies. This methodology was later trademarked as The Gabelli Private Market Value with a Catalyst Methodology.
By the mid 1980s Gabelli was managing over $350 million in client assets and compounding returns at more than 35 percent per year. While Business Week was touting the "Death of Equities" on its cover, Gabelli was quoted as saying "I don't need a rising market to bail me out." Gabelli's firm was doing all its own research, usually with the idea of identifying firms that might be candidates for leveraged buyouts: those with characteristics such as a large amount of cash on hand, underlying assets such as real estate, or a large block of stock in the hands of a company founder with no children. He also looked for companies in industries where new competition was difficult and cash flow was high. Once Gabelli selected such a stock, he was willing to wait for years until it appreciated. He began buying Cowles Communications, Inc., for example, in 1977 at $14 a share and eventually became its biggest stockholder. In 1984, the company (now Cowles Media Co.) was privatized at $46 a share, for a total payoff to Gabelli's clients of $33 million. Another media winner was Chris-Craft
, whose BHC Communications
achieved almost a sixfold pretax gain in income over six years in the 1980s and in the 1990s assembled its own network, United Television. The relentless Gabelli was visiting about 50 companies a year to gain information and meeting the managers of more than 100 other corporations annually, as well as getting together with other portfolio managers to discuss ideas and reading about 20 trade journals, two or three newspapers, and a number of industry and company reports. He also was writing research reports for his brokerage customers and portfolio-manager and other professional-investor clients. "I read annual reports instead of novels," Gabelli told Jerry Edgerton of Money in 1986. As a narrowly focused investor with large holdings in a few companies, he was able to bring influence to bear on company management.
Between 1978 and 1985, Gabelli's portfolios outperformed the Standard & Poor's index of 500 stocks each year and more than doubled the results of this S&P index in five of those years. Between 1977 and 1988, Gamco Investors' assets appreciated at an annual compounded rate of 28 percent, a rate exceeded by very few money managers. This money management entity had never lost money over a year and had met Gabelli's objective of ten percent annual return after taxes and inflation in all but two years. GAMCO Investors' equity assets, flush with cash invested by company pension funds, reached $1.6 billion in 1986.
as the domestic equity fund manager of the year.
In 2001, whistleblower Rufus Taylor III filed a civil lawsuit against several companies owned by Gabelli, alleging fraudulent practices in FCC
auctions between 1995 and 2000. In those auctions, the government set aside cell phone licenses to be sold to small businesses. Taylor's lawsuit said that Gabelli used more than twelve "sham" startup companies to meet the requirements of a small business applicant in the auctions and acquire the licenses at a small business discount, sometimes up to 25% off the high winning bid in the auction.
The lawsuit allegations claim Gabelli and the "sham" companies were fraudulent because Gabelli had de facto control over the companies and had wealth that far exceeded the ceiling of the small business criteria, which would disqualify an applicant from the small business discount auctions. Thus, by filing an application with the Federal government, much like filing a tax return with the Internal Revenue Service
, one is certifying the truth and authenticity contained in the document(s), which if false, is a potential Federal crime, never mind a cause for a civil lawsuit like the Taylor "whistleblower" lawsuit against Gabelli. The suit was put under seal for years and kept silent while the plaintiff and attorneys pursued their case, the government and Justice Department stood on the sideline and did not take up the suit for the American public. Little information about the quiet suit reached the media, in a time of Enron scandal
in the headlines, even though the suit sought almost half one billion U.S. dollars in damages from Gabelli and the defendants. The "whistleblower" actually was an attorney who once worked in the telecommmnications business for Gabelli companys' competitor Adelphia. Supposedly, many other groups of wealthy investors and players in the wireless auctions, totally unrelated to Gabelli, also set up "dummy" business arrangements to take advantage of the small business discount and succeeded, even though in reality they too could not pass the small business criteria. In other words, Gabelli and associates might be guilty, but they were not the only ones committing potential fraud. These parties were not sued by the government or private plaintiffs. Indeed, Gabelli's own attorney stated that Gabelli complied with FCC requirements and intimated that the FCC, if not the legal enforcement arms of the government like Justice Department, FBI, or Treasury white collar crime investigation, could have interceded and prevented fraudulent applications but did not do so, essentially acting with blinders while the FCC auction sales amounts grew higher and higher, bringing money to the government. Apparently, money is the prime mover and common denominator and the government may have turned a blind eye for a time. Nonetheless, given some new, heretofore unheard, evidence, come to light, in March 2006, the U.S. Government joined the Taylor lawsuit, which Taylor had filed under the Federal False Claims Act
. The suit had alleged that the Gabelli-backed false "entrepreneurs" included his relatives, a former aerobics instructor, and even the caretaker of a Gabelli vacation home, as well as other wireless auction players who worked for both Gabelli and non-Gabelli companies. On July 12, 2006, the suit was settled when Gabelli and his affiliated companies reportedly agreed to pay $130 million to settle the allegations. Taylor, the "whistleblower", was reported to have personally received $32.2 million for his part in the suit. Under the terms of the settlement, Gabelli was not required to admit any wrongdoing. Gabelli's money management business, GAMCO Investors, Inc., was not a party to the lawsuit. Neither Gabelli nor his companies nor any of the other parties were charged with any Federal criminal offense for fraud or false pretense, nor did they appear to face imprisonment. The Justice Department joined the suit, settled it very swiftly, then closed it. The American public saw little headlines of the multi-million dollar settlement nor did the Justice Department pursue any other wireless auction participants for fraud in the small business discount area. At the time of the settlement, the Justice Department portrayed its win as a triumph for the public good, but Gabelli and other FCC auction participants continue to participate in the ongoing auctions of wireless spectrum and other FCC license auctions, without punishment, and, indeed, the government has not given an accounting of where the money collected by the FCC for the auction sales resides, let alone the collection of money from Gabelli from the lawsuit.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
stock investor, investment advisor
Investment Advisor
The term Investment Advisor is an individual or firm who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities...
, and financial analyst
Financial analyst
A financial analyst, securities analyst, research analyst, equity analyst, or investment analyst is a person who performs financial analysis for external or internal clients as a core part of the job.-Job:...
. He is the founder, chairman, and CEO of Gabelli Asset Management Company Investors
GAMCO Investors
GAMCO Investors, Inc formerly known as Gabelli Asset Management Company is a provider of investment advice and brokerage services to mutual funds, institutional and select investors. One of the companies key elements of their success is the investment research publishing. It is listed on the New...
(GAMCO Investors) a $30 billion dollar global investment firm headquartered in Rye, New York
Rye (city), New York
Rye is a city in Westchester County, New York, United States. It is separate from the town of Rye, which is larger than the city. Rye city, formerly the village of Rye, was part of the town until 1942, when it received its charter as a city, the most recent to be issued in New York...
. Forbes
Forbes
Forbes is an American publishing and media company. Its flagship publication, the Forbes magazine, is published biweekly. Its primary competitors in the national business magazine category are Fortune, which is also published biweekly, and Business Week...
magazine's 2006 Forbes 400
Forbes 400
The Forbes 400 or 400 Richest Americans is a list published by Forbes Magazine magazine of the wealthiest 400 Americans, ranked by net worth. The list is published annually in September, and 2010 marks the 29th issue. The 400 was started by Malcom Forbes in 1982 and treats those in the list like...
rankings listed him as #346 on the list of wealthiest Americans and estimated his net worth
Net worth
In business, net worth is the total assets minus total outside liabilities of an individual or a company. For a company, this is called shareholders' preference and may be referred to as book value. Net worth is stated as at a particular year in time...
at $1 billion as of 2011.
In recent years, Gabelli has seen his reputation tarnished by a pair of scandals, as two high-profile lawsuits filed against his companies ended in combined settlements reportedly worth $230 million. He has also faced protests from his own investors over his large annual salaries.
Gabelli founded his firm in 1977 as a broker-dealer
Broker-dealer
A broker-dealer is a term used in United States financial services regulations. It is a natural person, a company or other organization that trades securities for its own account or on behalf of its customers....
, and the company has since grown into the diversified financial services corporation. Gabelli does not receive salary, bonuses, or stock options, but is paid a management-fee-based compensation. He was paid $55 million in 2004. His pay of $58.2 million in 2006 was "more than the pay of any senior executive of a major Wall Street firm" that year, despite the fact that he manages only a fraction of the assets of larger Wall Street companies. Gabelli was paid $45.9 million in 2008 at Gamco Investors, a 35% decrease compared to his 2007 compensation of $70.9 million.
Gabelli is a leading proponent of the Graham
Benjamin Graham
Benjamin Graham was an American economist and professional investor. Graham is considered the first proponent of value investing, an investment approach he began teaching at Columbia Business School in 1928 and subsequently refined with David Dodd through various editions of their famous book...
-Dodd
David Dodd
David LeFevre Dodd was an American educator, financial analyst, author, economist, professional investor, and in his student years, a of, and as a postgraduate, close colleague of Benjamin Graham at Columbia Business School.The Wall Street Crash of 1929 almost wiped out Graham, who had started...
school of security analysis and pioneered the application of Graham and Dodd's principles to the analysis of domestic, cash generating, franchise companies in a very wide range of industries. His proprietary Private Market Value methodology is now an analytical standard in the value investing
Value investing
Value investing is an investment paradigm that derives from the ideas on investment and speculation that Ben Graham and David Dodd began teaching at Columbia Business School in 1928 and subsequently developed in their 1934 text Security Analysis...
community.
Gabelli is a Chartered Financial Analyst
Chartered Financial Analyst
The Chartered Financial Analyst Program is a graduate level self-study program offered by the CFA Institute to investment and financial professionals...
, a member and former officer of the New York Society of Security Analysts
New York Society of Security Analysts
The New York Society of Security Analysts was established in 1937 by a group of financial professionals that included Benjamin Graham, a pioneer in the financial industry...
, the New York Society of Auto Analysts and the Entertainment Analysts Group of New York.
Gabelli has been a frequent commentator on CNBC
CNBC
CNBC is a satellite and cable television business news channel in the U.S., owned and operated by NBCUniversal. The network and its international spinoffs cover business headlines and provide live coverage of financial markets. The combined reach of CNBC and its siblings is 390 million viewers...
and CNN
CNN
Cable News Network is a U.S. cable news channel founded in 1980 by Ted Turner. Upon its launch, CNN was the first channel to provide 24-hour television news coverage, and the first all-news television channel in the United States...
, and appeared six times on Louis Rukeyser's Wall Street
Louis Rukeyser
Louis Richard "Lou" Rukeyser was an American financial journalist, columnist, and commentator, through print, radio, and television....
. Gabelli is often written about in the financial print media including Institutional Investor
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
, Business Week, Fortune
Fortune (magazine)
Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
, Forbes
Forbes
Forbes is an American publishing and media company. Its flagship publication, the Forbes magazine, is published biweekly. Its primary competitors in the national business magazine category are Fortune, which is also published biweekly, and Business Week...
, Money
Money (magazine)
Money is published by Time Inc. Its first issue was published in October 1972. Its articles cover the gamut of personal finance topics ranging from investing, saving, retirement and taxes to family finance issues like paying for college, credit, career and home improvement...
, and Changing Times. He has also written articles for investment publications such as the Financial Analysts Handbook and for the GAMCO blog.
Early life and education
Gabelli, the son of Italian immigrants, was born in The BronxThe Bronx
The Bronx is the northernmost of the five boroughs of New York City. It is also known as Bronx County, the last of the 62 counties of New York State to be incorporated...
and went to Fordham Preparatory School
Fordham Preparatory School
Fordham Preparatory School is a private Jesuit all-boys high school located in the Bronx, New York City, with an enrollment of approximately 950 students. It is located on the Rose Hill campus of Fordham University....
there. He has said he read market reports for fun when he was very young and that he bought his first stock when he was 13 years old.
Gabelli won a scholarship and graduated from Fordham University
Fordham University
Fordham University is a private, nonprofit, coeducational research university in the United States, with three campuses in and around New York City. It was founded by the Roman Catholic Diocese of New York in 1841 as St...
summa cum laude
Latin honors
Latin honors are Latin phrases used to indicate the level of academic distinction with which an academic degree was earned. This system is primarily used in the United States, Canada, and in many countries of continental Europe, though some institutions also use the English translation of these...
. Fordham University has renamed their College Of Business Administration to the Gabelli School Of Business after a $25 million donation in September 2010. He received his Master of Business Administration
Master of Business Administration
The Master of Business Administration is a :master's degree in business administration, which attracts people from a wide range of academic disciplines. The MBA designation originated in the United States, emerging from the late 19th century as the country industrialized and companies sought out...
degree
Academic degree
An academic degree is a position and title within a college or university that is usually awarded in recognition of the recipient having either satisfactorily completed a prescribed course of study or having conducted a scholarly endeavour deemed worthy of his or her admission to the degree...
from Columbia Business School
Columbia Business School
Columbia Business School is the business school of Columbia University in Manhattan, New York City. It was established in 1916 to provide business training and professional preparation for undergraduate and graduate Columbia University students...
. At Columbia, he was taught by Roger Murray, noted value investing professor and co-author of the Fifth Edition of Security Analysis, The Graham & Dodd Value Investing Bible. Gabelli and his firm later launched the Graham & Dodd, Murray, Greenwald Award for Distinguished Value Investors. This award is presented yearly at his Annual Client Symposium.
Value investing - The early years
After graduation, Gabelli accepted a position at Loeb, Rhoades & Co.Loeb, Rhoades & Co.
Loeb, Rhoades & Co. was a Wall Street brokerage firm founded in 1931 and acquired in 1979 by Sanford I. Weill's Shearson Hayden Stone. Although the firm would operate as Shearson Loeb Rhoades for two years, the firm would ultimately be acquired in 1981 by American Express to form Shearson/American...
as a farm equipment and auto parts analyst and later media and broadcasting. Gabelli was putting into practice the theory of value investing that he learned at Columbia. He rated companies not by earnings but cash flow, analyzing a firm in great detail to calculate what he called private-market value: not the share price at which a stock was selling on an exchange, but the price per share someone would be willing to pay in order to buy the whole company. This method would be widely used in the 1980s in leveraged buyouts, in which a public company's managers would buy their company, or at least a considerable part of it, and take it private. The calculations employed were often not the same as the standard valuation measures for public companies. This methodology was later trademarked as The Gabelli Private Market Value with a Catalyst Methodology.
Founding of Gabelli & Co.
In 1976, Gabelli formed Gabelli & Co., a brokerage house, with borrowed funds and money he had accumulated trading his own account. Soon after Gabelli formed Gabelli Investors ( later GAMCO Investors) to manage money for clients. After sending a memo to a Barron's editor touting a company he fancied, Chris-Craft Industries, Inc., Gabelli landed on the cover of this financial weekly. By 1981, GAMCO had 81 accounts and was managing about $33 million. Despite the rocky economy and stagnant stock market or the late 1970s and early 1980s, Gabelli made money for his clients each year. While investors were seeking to get in on the ground floor of a companies growth, Gabelli preferred to cash in on a company's death. During the next few years, he invested in or recommended companies that were taken over by other firms or privatized.By the mid 1980s Gabelli was managing over $350 million in client assets and compounding returns at more than 35 percent per year. While Business Week was touting the "Death of Equities" on its cover, Gabelli was quoted as saying "I don't need a rising market to bail me out." Gabelli's firm was doing all its own research, usually with the idea of identifying firms that might be candidates for leveraged buyouts: those with characteristics such as a large amount of cash on hand, underlying assets such as real estate, or a large block of stock in the hands of a company founder with no children. He also looked for companies in industries where new competition was difficult and cash flow was high. Once Gabelli selected such a stock, he was willing to wait for years until it appreciated. He began buying Cowles Communications, Inc., for example, in 1977 at $14 a share and eventually became its biggest stockholder. In 1984, the company (now Cowles Media Co.) was privatized at $46 a share, for a total payoff to Gabelli's clients of $33 million. Another media winner was Chris-Craft
Chris-Craft
For the NASA flight director, see Christopher C. Kraft, Jr.Chris-Craft, Inc. is a privately held American manufacturer of civilian powerboats based in Sarasota, Florida...
, whose BHC Communications
BHC Communications
BHC Communications, Inc. was the holding company for the broadcast property of Chris-Craft Industries. BHC is said to stand for "broadcasting holding company".-History:...
achieved almost a sixfold pretax gain in income over six years in the 1980s and in the 1990s assembled its own network, United Television. The relentless Gabelli was visiting about 50 companies a year to gain information and meeting the managers of more than 100 other corporations annually, as well as getting together with other portfolio managers to discuss ideas and reading about 20 trade journals, two or three newspapers, and a number of industry and company reports. He also was writing research reports for his brokerage customers and portfolio-manager and other professional-investor clients. "I read annual reports instead of novels," Gabelli told Jerry Edgerton of Money in 1986. As a narrowly focused investor with large holdings in a few companies, he was able to bring influence to bear on company management.
Between 1978 and 1985, Gabelli's portfolios outperformed the Standard & Poor's index of 500 stocks each year and more than doubled the results of this S&P index in five of those years. Between 1977 and 1988, Gamco Investors' assets appreciated at an annual compounded rate of 28 percent, a rate exceeded by very few money managers. This money management entity had never lost money over a year and had met Gabelli's objective of ten percent annual return after taxes and inflation in all but two years. GAMCO Investors' equity assets, flush with cash invested by company pension funds, reached $1.6 billion in 1986.
The Gabelli Mutual Funds
Gabelli's first investment vehicle for the general public, The Gabelli Asset Fund, launched in March 1986 as a no-load fund requiring a minimum of $25,000 to invest. Later, and today, this Fund is available for a minimum investment of $1,000 and accepts IRA investments without a minimum. The Asset Fund was later followed on by The Gabelli Equity Trust, a closed-end fund, which, at the time, was the largest equity offering on the NYSE. By the end of 1988, Gabelli's firm had three mutual funds—two run by himself—with combined assets of $650 million.Fund Manager of the Year - 1997
In 1997, when ten Gabelli equity funds averaged a return of 31.7 percent, the best of any U.S. mutual fund group, Gabelli was honored by Morningstar, Inc.Morningstar, Inc.
Morningstar, Inc. is an independent investment research company based in Chicago, Illinois, USA.-Businesses:Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for...
as the domestic equity fund manager of the year.
Fordham University
Among those recognized at the 2010 Fordham University Founder’s Award Dinner were Mario J. Gabelli, CBA ’65, and Regina M. Pitaro, FCRH ’76, a Fordham trustee and managing director of GAMCO Asset Management. In September 2010, Fordham formally announced Mr. Gabelli’s $25 million gift, the largest ever in the university’s history. The gift allowed Fordham, which renamed the undergraduate business college the Gabelli School of Business, to expand student scholarships and faculty chairs, and is crucial to the creation of the Center of Global Investment Analysis which brings together students, faculty and professionals in the financial community to enhance scholarship in the study and understanding of capital markets.Boston College
In September 2010, Boston College announced Mr. Gabelli’s $3 million gift that was used to endow a professorship in finance in the college’s Carroll School of Management. Previously, Mr. Gabelli, who serves on the college’s board of trustees, gave $10 million to create the Gabelli Distinguished Presidential Scholars Fund which provides fifteen students with full tuition every year.University of Miami
In 2011, a gift from Mr. Gabelli enabled the School of Business Administration to establish a new endowed professorship. The Gabelli Asset Management Endowed Professorship will provide critical support of the University’s faculty, research and services initiatives. In addition the Finance Professorship, GAMCO has supported the school’s academic initiatives, scholarships, mentoring and job placement initiatives.Barron's All-Century Team
On January 10, 2000, Gabelli was inducted into the Barron's All-Century Team, their list of the most influential mutual fund industry portfolio managers.The third decade
By 1998, Gabelli Asset Management Inc. was managing $16.3 Billion. In February 1999, the company went public selling 6 million shares, or about twenty percent of the common stock at $17.50 per share.Controversy and related
In March 2006, a judge awarded partial summary judgment in favor of claims that Gabelli had unfairly prevented investors Frederick Mancheski and David Perlmutter from selling their shares in Gabelli Group Capital Partners at fair market prices. In the ensuing settlement, Gabelli paid the two investors an estimated $100 million, including $80 million in GAMCO shares and approximately $20 million in cash.In 2001, whistleblower Rufus Taylor III filed a civil lawsuit against several companies owned by Gabelli, alleging fraudulent practices in FCC
Federal Communications Commission
The Federal Communications Commission is an independent agency of the United States government, created, Congressional statute , and with the majority of its commissioners appointed by the current President. The FCC works towards six goals in the areas of broadband, competition, the spectrum, the...
auctions between 1995 and 2000. In those auctions, the government set aside cell phone licenses to be sold to small businesses. Taylor's lawsuit said that Gabelli used more than twelve "sham" startup companies to meet the requirements of a small business applicant in the auctions and acquire the licenses at a small business discount, sometimes up to 25% off the high winning bid in the auction.
The lawsuit allegations claim Gabelli and the "sham" companies were fraudulent because Gabelli had de facto control over the companies and had wealth that far exceeded the ceiling of the small business criteria, which would disqualify an applicant from the small business discount auctions. Thus, by filing an application with the Federal government, much like filing a tax return with the Internal Revenue Service
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
, one is certifying the truth and authenticity contained in the document(s), which if false, is a potential Federal crime, never mind a cause for a civil lawsuit like the Taylor "whistleblower" lawsuit against Gabelli. The suit was put under seal for years and kept silent while the plaintiff and attorneys pursued their case, the government and Justice Department stood on the sideline and did not take up the suit for the American public. Little information about the quiet suit reached the media, in a time of Enron scandal
Enron scandal
The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world...
in the headlines, even though the suit sought almost half one billion U.S. dollars in damages from Gabelli and the defendants. The "whistleblower" actually was an attorney who once worked in the telecommmnications business for Gabelli companys' competitor Adelphia. Supposedly, many other groups of wealthy investors and players in the wireless auctions, totally unrelated to Gabelli, also set up "dummy" business arrangements to take advantage of the small business discount and succeeded, even though in reality they too could not pass the small business criteria. In other words, Gabelli and associates might be guilty, but they were not the only ones committing potential fraud. These parties were not sued by the government or private plaintiffs. Indeed, Gabelli's own attorney stated that Gabelli complied with FCC requirements and intimated that the FCC, if not the legal enforcement arms of the government like Justice Department, FBI, or Treasury white collar crime investigation, could have interceded and prevented fraudulent applications but did not do so, essentially acting with blinders while the FCC auction sales amounts grew higher and higher, bringing money to the government. Apparently, money is the prime mover and common denominator and the government may have turned a blind eye for a time. Nonetheless, given some new, heretofore unheard, evidence, come to light, in March 2006, the U.S. Government joined the Taylor lawsuit, which Taylor had filed under the Federal False Claims Act
False Claims Act
The False Claims Act is an American federal law that imposes liability on persons and companies who defraud governmental programs. The law includes a "qui tam" provision that allows people who are not affiliated with the government to file actions on behalf of the government...
. The suit had alleged that the Gabelli-backed false "entrepreneurs" included his relatives, a former aerobics instructor, and even the caretaker of a Gabelli vacation home, as well as other wireless auction players who worked for both Gabelli and non-Gabelli companies. On July 12, 2006, the suit was settled when Gabelli and his affiliated companies reportedly agreed to pay $130 million to settle the allegations. Taylor, the "whistleblower", was reported to have personally received $32.2 million for his part in the suit. Under the terms of the settlement, Gabelli was not required to admit any wrongdoing. Gabelli's money management business, GAMCO Investors, Inc., was not a party to the lawsuit. Neither Gabelli nor his companies nor any of the other parties were charged with any Federal criminal offense for fraud or false pretense, nor did they appear to face imprisonment. The Justice Department joined the suit, settled it very swiftly, then closed it. The American public saw little headlines of the multi-million dollar settlement nor did the Justice Department pursue any other wireless auction participants for fraud in the small business discount area. At the time of the settlement, the Justice Department portrayed its win as a triumph for the public good, but Gabelli and other FCC auction participants continue to participate in the ongoing auctions of wireless spectrum and other FCC license auctions, without punishment, and, indeed, the government has not given an accounting of where the money collected by the FCC for the auction sales resides, let alone the collection of money from Gabelli from the lawsuit.