GCI Communications Corp. to Pay More than $40 Million to Resolve False Claims Act Allegations Related to FCC’s Rural Health Care Program

GCI Communications Corp. (GCI), located in Anchorage, Alaska, has agreed to pay $40,242,546 to resolve allegations that it violated the False Claims Act by knowingly inflating its prices and violating Federal Communications Commission (FCC) competitive bidding regulations in connection with GCI’s participation in the FCC’s Rural Health Care Program. The program provides more than $570 million each year to assist rural health care providers with their telecommunications needs.

Under the Rural Health Care Program, the FCC pays a subsidy equal to the difference between the more expensive cost for a telecommunication service in a rural area and the less expensive cost for the same service in an urban area in the same state. FCC regulations also require contracts for these subsidized services be awarded through a competitive bidding process. The United States alleged that, between 2013 and 2020, GCI failed to comply with FCC regulations that governed how telecommunications companies must calculate their prices for purposes of claiming subsidy payments, and as a result GCI received greater subsidy payments than it was entitled to. The United States further alleged that GCI caused Eastern Aleutian Tribes Inc., a rural health care provider in Alaska, to agree to inflated prices after the relevant contract was competitively bid. As a result, GCI knowingly received higher payments under the program, from 2015 through 2018, in connection with its contract with Eastern Aleutian Tribes, Inc.

“Telecommunications providers that seek to participate in important FCC programs like the Rural Health Care Program must comply with applicable rules, including those governing how they competitively bid on contracts and set their prices,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “Today’s settlement demonstrates our continuing commitment to preventing the misuse of taxpayer funds.”

“Providing health care services in rural areas, especially to Indigenous people in remote areas of Alaska, is vital and must be protected,” said U.S. Attorney Nick Brown for the Western District of Washington. “This $40 million settlement should deter other companies from attempting to improperly enrich themselves by overcharging the government for important healthcare-related telecommunications services.”

“Service providers who utilize the Rural Health Care Program to provide necessary services to health care providers in rural areas, such as GCI provides to Alaska health care providers, cannot disregard FCC’s rules that require specific processes to ensure fair reimbursement for services,” said Acting FCC Inspector General Sharon Diskin.  “The Rural Health Care Program has limited funds and we continue to ensure that those funds are not subject to fraud, waste or abuse.”

“Compliance with the Universal Service Fund’s Rural Health Care 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,” said FCC Enforcement Bureau Chief Loyaan Egal. “This global settlement reflects our strong partnership with the Department of Justice in protecting the USF, and we thank them for their efforts in this particular case.”

Contemporaneous with the civil settlement, GCI has agreed to enter into a corporate compliance agreement with the FCC. GCI will also resolve an FCC administrative investigation and an FCC proceeding arising from GCI’s participation in the Rural Health Care Program.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Robert Taylor, GCI’s former Director of Business Administration. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned U.S. ex rel. Taylor v. GCI Liberty, et al., Case No. 19-cv-2029 (W.D. Wash.). The whistleblower will receive $6.4 million as his share of the recovery.

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the United States Attorney’s Office for the Western District of Washington, with assistance from the FCC’s Office of the Inspector General and the FCC’s Enforcement Bureau.

The matter was handled by Trial Attorney David M. Sobotkin and Assistant U.S. Attorney Kayla Stahman for the Western District of Washington.

The claims resolved by the settlement are allegations only and there has been no determination of liability.