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FCC creates a new division to fight fraud in Universal Service Fund programs

FCC is launching a new division to fight fraud in Universal Service Fund programs, which provide support and access to telecommunications in the US. Photo: Brad Covington

The Federal Communications Commission has stepped up its efforts to combat waste, fraud and abuse in Universal Service Fund programs by establishing a fraud division within the FCC Enforcement Bureau.

“. . .It is vital that we maintain a steady eye on these programs to address the unfortunate reality that, over the years, too much money that should have gone to connect American consumers and businesses has been lost, stolen or misused,” said Rosemary Harold, chief of the FCC Enforcement Bureau, in a press release announcing the decision to create the new fraud division.

The purpose of the Universal Service Fund is to provide universal access to telecommunications in the US. There are four key programs:

  • The Connect America Fund. Also known as the high-cost program, it allows telecommunications carriers to recover some of their costs to provide services to consumers in rural, insular and high-cost areas.
  • The E-Rate program. It makes internet access more affordable for schools and libraries by covering 20 percent to 90 percent of costs based on the level of poverty and whether the facility is located in an urban or rural area.
  • The Lifeline program assists low-income consumers with a small subsidy for telephone and broadband services.
  • The Rural Health Care Program offers rural healthcare providers discounted telecom and broadband services.

Fraud involving Universal Service Fund programs

The Universal Service Fund programs have been the target of fraud schemes. The largest case so far was against American Broadband, which the FCC said had improperly obtaining funding from the Lifeline program by manipulating the personal information of the program’s current subscribers and by creating fake accounts by enrolling deceased individuals. The FCC fined American Broadband more than $63 million last year.

Last week, the FCC proposed an $18.7 million fine against DataConnex, which it alleged had defrauded the Rural Health Care Program by using forged and misleading documents to improperly seek funding from the Universal Service Fund.

Whistleblowers who know of companies defrauding the Universal Service Fund programs may file “qui tam” lawsuits under the False Claims Act to stop the fraud and help the government recover those funds.

Phillips & Cohen LLP has experience representing whistleblowers in fraud cases involving the Universal Service Fund. Multiple technology vendors and consultants, including NEC and Inter-Tel, paid over $30 million to settle allegations – revealed in a qui tam lawsuit filed by Phillips & Cohen – that they defrauded the federal E-Rate program.

If you are aware of fraud in any Universal Service Fund program and would like to discuss the matter with an attorney at no charge, you can contact us via encrypted email for a free, confidential review to learn your options and the potential risks and rewards of bringing a whistleblower case.

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