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$26M in Direct USF Restitution

GCI to Pay $40.24M to Settle Violations of FCC’s Rural Health Care Program Rules

Liberty Broadband subsidiary GCI Communications agreed to pay $40.24 million to settle allegations it breached the False Claims Act by knowingly inflating its prices and violating FCC competitive bidding rules in connection with its participation in the commission’s Rural Health Care (RHC) program, said DOJ and the FCC in a statement Thursday. Just over $26 million of the settlement amount will be USF restitution payments directly to the FCC under a contemporaneous consent decree with the commission, said the settlement agreement.

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The settlement includes the resolution of claims brought under the whistleblower provisions of the False Claims Act by Robert Taylor, GCI’s former director-business administration, said DOJ. Under the qui tam provisions of the statute, a private party can file an action on behalf of the U.S. and receive a portion of any recovery. Taylor will receive $6.44 million as his share of the recovery after GCI pays its settlement obligations in full, said the settlement agreement.

Taylor’s original December 2019 complaint (docket 2:19-cv-02029) in U.S. District Court for Western Washington alleged GCI falsely claimed and received funds from the RHC program in connection with its contract with Eastern Aleutian Tribes by increasing the rates GCI charged after the competitive bidding period closed, in violation of FCC regulations, said the settlement agreement. Taylor’s first amended complaint in January 2020 added allegations that GCI caused rural healthcare providers to buy “unnecessarily high bandwidth” and that GCI “understated” the USF contributions it was required to pay as a telecommunications provider, it said.

Taylor’s second amended complaint in June 2021 added allegations GCI falsely claimed and received funds from the RHC program based on rural telecommunications rates the company calculated in violation of FCC regulations, said the settlement agreement. Taylor also alleges GCI violated the FCC’s e-rate regulations requiring telecommunications companies to charge schools and libraries only the lowest corresponding price for broadband and other services, it said.

As the result of the false claims GCI submitted to the RHC program between April 2015 and November 2018, the FCC “made greater disbursements to GCI than the amounts to which it was otherwise entitled,” said the settlement agreement. GCI also submitted false claims to the FCC, based on inflated prices and rural rates, for the USF funding years 2012 through 2016, it said. The settlement agreement “is neither an admission of liability by GCI nor a concession by the United States that its claims are not well founded,” it said.

Service providers that use the FCC’s RHC program to provide necessary services to healthcare providers in rural areas, such as GCI provides to Alaska healthcare providers, can’t “disregard FCC’s rules that require specific processes to ensure fair reimbursement for services,” said acting FCC Inspector General Sharon Diskin in the DOJ statement. The RHC program “has limited funds and we continue to ensure that those funds are not subject to fraud, waste or abuse,” she said. FCC Enforcement Bureau Chief Loyaan Egal said in the same statement that compliance with the USF’s RHC program rules “is a critical component in making sure that medical providers have access to the types of communications equipment and services needed to enhance medical options and care in rural communities.”

GCI has been serving Alaska for more than 40 years and connects some of the smallest, most remote communities in the U.S., Heather Handyside, GCI's chief communications officer, told us Friday. As a longtime RHC provider, “we take seriously the responsibility of being effective stewards” of USF support, she said: “This settlement concludes several years of active discussions with federal regulatory agencies. It reflects the result of both broad changes in program guidance and past challenges GCI identified during an extensive internal review.”

In 2019, the FCC updated its guidance for calculating rates charged under the program, and “this settlement specifically reflects the retroactive application of this guidance to the years 2010 through 2016,” Handyside said. The settlement also “resolves a limited number of compliance issues” for GCI’s participation in the program, “which GCI identified and self-reported,” she said: “GCI has conducted a comprehensive internal review to ensure that appropriate protocols are in place going forward and that we are coordinating with our customers and federal agencies in the application and administration of funds.”