We have previously written about Wisconsin Bell v. U.S. ex rel Heath, and as anticipated, the U.S. Supreme Court has ruled that the federal False Claims Act (“FCA”) applies to the USF E-Rate Program.
The Wisconsin Bell decision comes amid constitutional challenges to the USF’s funding and administrative structure. The USF Program’s very existence as providers are currently familiar with may significantly change in the coming months. But in light of the Court’s Wisconsin Bell ruling, providers should ensure that their claims for E-Rate subsidies comply with all program requirements and accurately reflect amounts the providers are entitled to in order to head off potential FCA liability.
The FCA
The FCA is the government’s primary tool for combating fraud against government programs. 31 U.S.C. § 3729 et seq. An entity found to have violated the FCA can face substantial financial consequences, including treble damages, civil monetary penalties (during 2024, these ranged between $13,946 to $27,894 per claim), and reimbursement of the government’s fees and costs in pursuing the matter. See 31 U.S.C. § 3729(a).
Key to the Wisconsin Bell case is whether E-Rate funds are part of the public fisc. In order for a claim (or statement material to such a claim) to be subject to the FCA, it must involve public funds. Id. at § 3729(b)(2). For claims submitted to a contractor or grantee, the public funds requirement is satisfied “if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest” and “if the United States Government provides or has provided any portion of the money.” Id. at § 3729(b)(2)(A)(ii)(I). Alternatively, a claim to presented to “an agent” of the United States can trigger the FCA just as if it was made to a federal government officer or employee. Id. at § 3729(b)(2)(A)(i).
Litigation and Appeal
The Wisconsin Bell case was initiated by Todd Heath, a qui tam whistleblower (referred to in the statute as a “relator”). Heath alleged that defendant Wisconsin Bell improperly charged school and library customers more than the required “lowest corresponding price” for its services. Heath further alleged that Wisconsin Bell violated the FCA by seeking reimbursement from the E-Rate Program for these inflated charges, and additionally submitted false certifications of compliance with applicable rules and regulations. Heath asserted that the overcharges resulted in Wisconsin Bell receiving more from the E-Rate Program than it was entitled to, thereby harming the public fisc. The federal government, through the U.S Department of Justice, declined to intervene in the matter, allowing Heath to continue the litigation. Wisconsin Bell eventually moved for summary judgment, which was granted by the District Court. The Seventh Circuit Court of Appeals reversed the district court’s ruling, holding, among other things, that there was “sufficient evidence in the record from which a reasonable jury could find that government funds were involved in the payments at issue.” See United States ex rel. Heath v. Wis. Bell, Inc., 75 F.4th 778, 789 (7th Cir. 2023).
The Court granted cert on a specific question: “Whether reimbursement requests submitted to the E-rate program are ‘claims’ under the False Claims Act.”
Supreme Court Finds E-Rate Program is Publicly Funded
The Court issued its unanimous ruling on February 21, 2025. Justices Thomas and Kavanaugh submitted concurring opinions. Justice Alito joined Justice Thomas’ concurrence.
The Court concluded that E-Rate reimbursement requests qualify as “claims” subject to the FCA because the federal government deposited money into the USF for payment of subsidies. See 604 U.S. ____, p. 7 (2025). The government’s deposits —totaling more that $100 million in the years relevant to the case—came from two sources: (1) delinquent contributions from carriers successfully collected by the FCC and Treasury Department; and (2) civil and criminal recoveries obtained through the Department of Justice’s enforcement of various program requirements. Thus, the government “supplied funds, furnished funds, and made available funds” to the USF for the purpose of reimbursing claims from E-Rate Program participants. See p. 9.
Wisconsin Bell argued that E-Rate funds should be classified as private because carriers contribute the money that serves to reimburse USF claims. The Court flatly rejected that this put E-Rate reimbursements beyond the FCA’s reach: “as the FCA sees the matter, the technical ownership of the $100 million that the Government conveyed to the Fund makes not a whit of difference.” See p. 12. Moreover, the statute does not require the government have “title to the money”; all that is needed for FCA liability to attach is that the government “provided” some portion of the funds. See p. 12, discussing 31 U.S.C. § 3729(b)(2)(A).
Thus, under the Court’s ruling in Wisconsin Bell, the E-Rate Program is publicly funded and carriers and others seeking E-Rate subsidies can be held liable for violating the FCA.
Key Takeaways
- The FCA applies whenever some portion of the funds come from government sources. And this holds even when private industry contributes a portion of the funds at issue. So long as federal appropriations, or funds from the Treasury flow into a program like the E-Rate program, the FCA will be employed to protect the public
- While the USF’s fate may be decided in future cases, participating providers are currently subject to the FCA. Providers should ensure that their claims and submissions comply with regulatory requirements in order to avoid potential FCA liability.
In the event a provider finds itself under investigation for submitting false claims for E-Rate funding, it should seek the assistance of counsel experienced in dealing with FCA matters. Counsel can assist with responding to DOJ investigative demands, obtaining assistance from experts, and formulating strategies for countering the government’s damages and penalties calculations. FCA practice has unique substantive and procedural elements, which knowledgeable counsel can help navigate.
Call to Action!
In addition to In addition to providing comprehensive regulatory compliance and services for the telecommunications and technology sectors, Marashlian & Donahue, PLLC leverages the subject matter expertise of other practitioners to assist clients with a range of legal matters. Case-in-point is our collaboration with the Law Office of Julia A. Clayton, P.C. This collaboration enhances our ability to address False Claims Act matters and State Attorneys General investigations, along with complex privacy litigation (CCPA and CIPA) and legal matters arising in California. Clients of our firm now have access to a broader range of expertise and support, ensuring comprehensive legal solutions. For those interested in or impacted by these issues, this association offers invaluable opportunities to navigate the evolving legal landscape effectively. Contact us to learn how we can assist you with your specific legal needs.
