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Judge rejects proposed member of LightSquared auction committee

By Nick Brown

NEW YORK (Reuters) - A U.S. judge on Tuesday blocked a proposed appointee to a committee to oversee the bankruptcy auction of broadband company LightSquared LP, citing a conflict of interests, and admonished the company for making the nomination.

Donna Alderman cannot be part of the committee because she could be seen as having a bias against satellite television company Dish Network Corp, which is seeking to acquire LightSquared's spectrum, U.S. Bankruptcy Judge Shelley Chapman said.

Alderman, a former director at satellite operator DBSD, lost her job when Dish acquired DBSD in 2011, then unsuccessfully sought $7 million from Dish for her role in generating value for DBSD's estate. She ended up with $750,000 in severance.

LightSquared's creditors objected to Alderman's appointment on Monday, citing her bitterness toward Dish.

At a hearing in the U.S. Bankruptcy Court in New York on Tuesday, Chapman lambasted the proposed appointment, saying Alderman could be perceived as having an anti-Dish bias.

"Let's cut to the chase," Chapman told a lawyer for LightSquared. "You had a list of a dozen candidates. And yet we have someone who has caused, with all due respect, a tremendous amount of controversy and raised the specter of yet another sideshow. Frankly, I don't understand it."

A source with knowledge of the situation said Alderman and Dish had a falling-out after DBSD was bought by Dish, and in emails reported by the Wall Street Journal on Monday, Alderman said she felt "screwed" by Dish.

At Tuesday's hearing, LightSquared attorney Matthew Barr played down Alderman's feelings toward Dish.

"Unfortunately, people send emails like that, but do they really mean them?" Barr said. "Do you not have the ability to stand up and say, ‘I sent those emails but I am telling you I do not have a bias?'"

Chapman said the company should not have a problem finding a replacement "in the financial capital of the world."

"There are other folks out there who can do this," she said.

LightSquared declared bankruptcy in 2012 after the Federal Communications Commission revoked its license to use its spectrum amid concerns a plan to build a wireless network could interfere with global positioning systems.

Its bankruptcy has been marred by mistrust and accusations of wrongdoing between Phil Falcone's Harbinger Capital Partners, which owns more than 80 percent of the company, and Dish, whose chief executive, Charlie Ergen, is staging an aggressive takeover effort.

A Dish affiliate has offered $2.2 billion for LightSquared's spectrum. According to a lawyer for Dish, Rachel Strickland, Harbinger has refused to negotiate.

LightSquared has agreed to auction itself to the highest bidder. Lenders have said Harbinger's interest lies in blocking a sale and that it cannot be trusted to run its own auction.

Competing proposals by the company and its lenders for how to run the auction, initially slated to be argued at Tuesday's hearing, were adjourned until next Monday as the sides try to hash out a resolution.

LightSquared had agreed to appoint an independent, three-member committee to oversee the auction. In addition to Alderman, it named former restructuring lawyer Alan Carr and investment adviser Neal Goldman to the committee, whose members would receive $35,000 a month in compensation.

(Reporting by Nick Brown; editing by Andrew Hay)

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