FCC Announces Creation of Fraud Division to Fight Fraud in USF and Other Programs

The FCC continues to combat fraud in its Universal Service Fund (“USF”) programs.  In its recent 19-3 Order, the FCC announced the creation of a Fraud Division within the Enforcement Bureau.  The division “will be dedicated to taking enforcement actions against fraud in the USF and other funding programs that the Commission oversees.”

According to Enforcement Bureau Chief Rosemary Harold in the FCC’s press release, “Protecting taxpayer dollars as we use Universal Service Fund programs to bridge the digital divide lies at the heart of our work at the FCC.”  There are four USF programs intended bridge the divide that Harold discussed. There are the: (1) E-rate program for schools and libraries, (2) High Cost program for areas where it is expensive to build out a telecommunications network, (3) Lifeline program for low-income individuals, and (4) Rural Healthcare program for healthcare providers.

In the Order, the FCC cites to various cases in which USF recipients exploited the programs by submitting false or inaccurate data to receive greater funds than the recipients would otherwise qualify for.  In consequence, the FCC has issued large fines and has required repayment of improper funds.  Specifically, the Order cites the $63 million fine against American Broadband and the proposed $18.7 million fine against DataConnex, both issued in 2018.  The Order also cites to the Sandwich Isles case from 2016 in which the FCC issued a $49 million fine and ordered $27 million in repayment.  The FCC relies on these cases to illustrate the need to dedicate a division to prevent fraud, waste, or abuse within the USF programs.

The FCC will create the Fraud Division by internally reorganizing the Enforcement Bureau, which permits the FCC to forego public notice and comment on the division’s creation.  The division will consist of Enforcement Bureau employees who have already been handling fraud cases.  Division employees will also continue to “work collaboratively with other law enforcement entities,” as the Bureau has done in cases of fraud.  The Order does not provide further information regarding the organization of the division.  However, the division’s location within the Enforcement Bureau indicates that the FCC intends to use the Fraud Division in pursuance of the Bureau’s self-identified goals: “to investigate and respond quickly to potential unlawful conduct to ensure: (1) consumer protection in an era of complex communications; (2) a level playing field to promote robust competition; (3) efficient and responsible use of the public airwaves; and (4) strict compliance with public safety-related rules.”

Before the FCC can officially create the Fraud Division, it needs approval from the Office of Management and Budget and the House and Senate Appropriations Committees.  The Order must also be published in the Federal Register.

For more information regarding how the creation of a Fraud Division might affect your company, please contact Jonathan Marashlian at jsm@commlawgroup.com or at 703-714-1313.

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