Alaskan company pays $40 million to settle FCC fraud allegations

by Ben Vernia | May 12th, 2023

On May 11, the Department of Justice announced that Anchorage-based GCI Communications had agreed to pay more than $40 million to settle a whistleblower’s allegations that the company defrauded the FCC’s Rural Health Care program. According to DOJ’s press release:

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.

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DOJ announced that the whistleblower, a former GCI employee, will receive $6.4 million of the settlement (a 16% relator’s share). GCI also agreed to enter into a corporate compliance agreement with the FCC.

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