LIC Lynch Interactive Corp

Lynch Interactive (AMEX: LIC) today announced that in addition to a shareholder vote on a proposal to de-list the company and a report on recent results of operations, it will address issues surrounding a false claims lawsuit in which it is a defendant at its annual meeting on October 31. The company said it intends to defend itself vigorously against the suit, which it believes is frivolous, without merit and an abuse of the whistleblower laws. Lynch Interactive Corporation will bring shareholders up-to-date on the law suit, which is being conducted against the company and others by three groups of contingency lawyers who have banded together: Mr. R.C. Taylor III, John Phillips of Phillips & Cohen speaking on behalf of Mr. Taylor; and Williams & Connolly working with Phillips and Cohen. Small Business - Affirmative Action As part of an Omnibus Budget Reconciliation Act of 1993 ("OBRA '93"), the FCC was directed to conduct spectrum auctions as a means of allocating radio spectrum for commercial mobile radio communications services ("CMRS"). Prior to this period, spectrum was given away for free. The government recognizing the significant money the auctions could generate from the sale of spectrum, as well as the large amount of capital needed to participate, included provisions for affirmative action and small businesses. Specific rules were established by the FCC for the inclusion of women and minorities. Lynch Interactive Corporation participated in these auctions in a role similar to that of a venture capital partnership. In the conduct of these auctions, Lynch Interactive and the designated entities followed the spirit and the letter of the law, using internal and highly qualified external counsel, Latham & Watkins, to insure compliance with all Federal Communication Commission requirements. Licenses were granted by the FCC, which approved all license applicants. Notably, the Department of Justice has declined to intervene in the case. The suit, a form of legal extortion, (for further background, refer to Forbes, March 14, 2005, The Dark Side of Whistleblowing) seeks to undermine the credibility of the women and minority participants in these auctions. In this case, the unintended consequence of the whistleblowing litigation is that contingency lawyers are hurting people who were brought into the auction process by the government, including possibly forcing them into bankruptcy. Lynch Interactive is committed to fighting this abuse of the whistleblower laws. Lynch's Role Management's job is to make money for Lynch's investors. Lynch served as a service provider to these companies and acted as an investor and supporter in their efforts, as well as acting as a service provider to GGCP (affiliated with Lynch's Chairman and CEO) in its investment role as a venture capital organization. "This lawsuit is particularly ugly, as it seeks to extract money by assaulting the character and competence of minority and female entrepreneurs and small business people who did nothing wrong and who were only seeking to participate in a process the U.S. government was encouraging them to enter," said Mario Gabelli, Chairman & CEO of Lynch Interactive. "It is unconscionable for a group of contingency lawyers to attack these individuals in this way in an effort to give themselves a big payday." Mr. Gabelli added, "That people like Trent Tucker, who shared with me his ambition to own a business after his many years of success in the NBA, find themselves as defendants in this lawsuit is tremendously unfair. Mr. Tucker had every right to pursue ownership and operation of a wireless system and participate in these auctions and in no way deserves to have his motivations and integrity questioned or his actions falsely portrayed for the sake of a frivolous lawsuit. The same is true of all the other individuals who have been targeted by this suit." Our Annual Meeting As previously announced, Lynch has mailed its proxy to shareholders for a vote on October 31, associated with its annual meeting. Shareholders will be asked to approve a proposal to have the company de-list itself from the American Stock Exchange. The company has said that given the size of its market capitalization the cost of complying with new regulatory requirements are burdensome both in terms of direct incremental expense and the time and energy of its management team. Lynch also expects to report preliminary results for third quarter operations at the meeting. This release contains certain forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 194, as amended. Lynch Interactive is a holding company with subsidiaries in multimedia and actively seeks acquisitions, principally in existing business areas. Lynch Interactive is listed on the American Stock Exchange under the symbol LIC. Interactive's World Wide Web address is: http://www.lynchinteractivecorp.com