800 MHz Licensee Smartcomm, Subsidiary File for Bankruptcy
Tuesday, April 09, 2019 | Comments

A spectrum acquisition company and its licensing services subsidiary both filed for bankruptcy at the end of March.

Both Smartcomm and Smartcomm License Services filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the District of Arizona. Unlike Chapter 11 bankruptcy, Chapter 7 bankruptcy does not allow for the reorganization of a company, meaning that all of the companies’ assets will be liquidated to help pay back creditors.

Smartcomm’s summary of assets and liabilities lists a little more than $4.5 million in assets against a little more than $20.4 million in liabilities. The summary for Smartcomm License Services, a wholly owned subsidiary of Smartcomm, lists $98 worth of assets against liabilities of nearly $25 million.

According to its website, Smartcomm License Services holds 11 800 MHz licenses spread around western Oklahoma and Texas. The FCC did not respond to a question about what effect the bankruptcy would have on the licenses. The bankruptcy documents for either company do not list the licenses as assets.

The parent company’s liabilities include outstanding payments and costs related to lawsuits that total nearly $4 million, while the remainder of that debt is a $16.43 million loan Smartcomm License Services made to its parent company.

Smartcomm License Services’ debts include a variety of business-related debts as well as legal debts similar to the parent company. The legal debts relate to a lawsuit first filed by Smartcomm in 2010 against a variety of defendants, including Kent Maerki, David Alcorn, Jon Palmieri and Janus Spectrum, in Maricopa County Superior Court in Arizona.

In 2015, the court ordered Maerki to pay $28 million in compensatory damages, punitive damages and attorney fees to Smartcomm. Smartcomm’s bankruptcy filing lists that award as an asset but marks it as “probably uncollectable.”

According to a 2015 press release from Wilenchik & Bartness, Smartcomm’s law firm, Smartcomm sued Maerki for misappropriation of trade secrets and confidential and proprietary information and wrongful interference with business relations.

Maerki and other defendants on the case allegedly diverted Smartcomm business into Janus Spectrum, the press release said. Smartcomm was only awarded the damages from Maerki, according to the court docket for the case.

In August 2016, Alcorn, Palmieri and Janus Spectrum were all awarded attorneys’ fees and court costs from Smartcomm by the Maricopa County Superior Court. In April 2018, all three received additional awards of attorneys’ fees and costs from the court. The reason for those attorney fees and cost awards is unclear as the documents for the case were not available by press time.

Janus Spectrum filed for Chapter 11 bankruptcy in March 2014, primarily because of the lawsuit filed against it by Smartcomm, according to a motion to dismiss that case filed by Janus Spectrum’s trustee in the case in 2015.

In 2015, the U.S. Securities and Exchange Commission (SEC) also filed a lawsuit against Janus Spectrum alleging that Maerki and Alcorn had participated in a scheme to defraud investors using FCC spectrum licenses that they knew or should have known had little value.

The U.S. District Court of Arizona reached a summary judgment in favor of the SEC in October 2017 and ordered Janus Spectrum, Alcorn, Maerki and David Alcorn Professional Corp. (DAPC) to pay more than $7 million in damages. The court also issued an injunction preventing the defendants in the case from pursuing similar activities to those involved in the case.

The judge in Janus Spectrum’s bankruptcy case appointed a trustee to oversee the case because of the nature of the two lawsuits against Janus Spectrum. At that point, the SEC and Smartcomm were the two biggest creditors to Janus Spectrum and trustee Maureen Gaughan decided to put Janus Spectrum’s operations on hold because of the SEC allegations that its business model was unlawful and to see what happened in that case, as well as Smartcomm’s case against Janus Spectrum.

In her Nov. 25, 2015, motion to dismiss the bankruptcy case, Gaughan said that a Maricopa Superior Court judge had ruled in favor of Janus Spectrum against Smartcomm in the case, meaning that Smartcomm no longer had a claim against Janus in the bankruptcy case. Gaughan noted in her motion that she expected months of legal haggling over attorneys fees, sanctions and appeals in that case. About nine months later, the court awarded Janus Spectrum, Alcorn and Palmieri their first set of judgments for attorneys’ fees and costs from Smartcomm and its subsidiary.

Gaughan said in her motion that because Smartcomm and the SEC were the two major debt holders, the case should be dismissed, and the two creditors should continue to protect their interests through the lawsuits. The judge agreed and dismissed the bankruptcy proceedings for Janus Spectrum.

In September 2018, Alcorn and DAPC filed another lawsuit against Smartcomm and Smartcomm License Services, as well as Carole Downes, who is listed as the registered agent for Smartcomm and its subsidiary in the state of Arizona’s business database and in the bankruptcy filings. Smartcomm License Services’ website identifies Downes as the company’s CEO. The details of that case, which was also filed in Maricopa Superior Court, were not available at press time.

M2M Spectrum Networks is listed as another one of the defendants in Alcorn’s 2018 lawsuit. Downes is listed as one of two registered agents for M2M Spectrum Networks, as well as Spectrum Networks Group, in the Arizona business database.

In 2017, the Enterprise Wireless Alliance (EWA) filed an ex parte letter with the FCC expressing concern that efforts by M2M Spectrum Networks, its affiliated partners and the Wireless Infrastructure Association (WIA) to persuade the FCC not to provide 800 MHz incumbents with an advanced opportunity to access expansion/guard band spectrum could evade FCC rules governing the number of initial channels available to an entity in the market.

In 2018, M2M Spectrum Networks and Spectrum Networks Group merged to form Iota Networks, according to SEC filings. Iota Networks then agreed to merge with Delaware-based Iota Communications and become a wholly owned subsidiary.

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