United States: "The FCC Won't Let Me Be": GCI Settles With DOJ And FCC In FCA Case Alleging Bid-Rigging And Inflated Pricing

On May 11, 2023, the Department of Justice (DOJ) announced that Alaska's largest telecommunications provider, GCI Communications Corp. (GCI), had agreed to pay US$40 million to settle a False Claims Act action brought against the company by one of its employees: U.S. ex rel. Robert Taylor v. GCI Liberty, Inc., No. 19-CV-02029 JCC (W.D. Wash. 2021). The relator alleged that the company engaged in price inflation and bid rigging in violation of the Federal Communications Commission's (FCC) regulations surrounding the Universal Service Fund's Rural Health Care Program (RHCP).

Through the RHCP, which promotes access to healthcare in rural areas, the FCC pays companies the difference between providing telecommunications services in rural areas versus more densely populated areas in the same state. The program gives $570 million annually to eligible companies. Companies participating in the RHCP must go through a competitive bidding process regulated by the FCC.

The relator alleged that GCI engaged in several schemes. First, the relator alleged that when GCI learned it was the only bidder for a contract with Eastern Aleutian Tribes, Inc. to provide telecommunications services, it retracted its original bid and entered a higher bid for the contract, in violation of FCC regulations. Second, the relator alleged that GCI failed to offer the "Lowest Corresponding Price" to eligible schools and libraries. Third, the relator alleged that GCI underreported its revenues to avoid its obligations to pay into the Universal Service Fund. Finally, the relator alleged that GCI sold as much bandwidth to RHCP customers as it could even when the customers had no need for the bandwidth purchased. GCI certified compliance with FCC regulations of the RHCP when it applied for subsidies. As a result of these alleged schemes, the government contended that the FCC made greater disbursements to GCI than the amounts to which it was otherwise entitled.

In connection with the settlement, in addition to entering into a settlement agreement with DOJ (to which the FCC is a signatory), GCI entered into a Compliance Agreement with the FCC. The Compliance Agreement mandates that GCI designate a Compliance Officer, create a compliance plan and hotline, develop a compliance manual and training program, and create fraud and noncompliance detection and monitoring plans, in addition to engaging in audits and annual compliance reports.

Though much of the focus of FCA settlements is on the life sciences industry, the FCC's role in this action should serve as a reminder that FCA actions can arise in any highly regulated industry where companies receive funds from the government, and the telecommunications industry is as ripe a ground as any for these types of actions.

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