In a significant development for the telecommunications industry, Armstrong Group has agreed to pay $6.5 million to settle allegations under the False Claims Act. The settlement resolves claims that the Butler, Pennsylvania-based company violated Federal Communications Commission (FCC) regulations concerning the High-Cost Program, which is part of the Federal Universal Service Fund (USF). The Armstrong Group’s former Controller blew the whistle on the telecommunications company. He will receive $1,267,500 or about 19.5% of the settlement as a reward.

Allegations Against Armstrong Group

The United States government alleged that the Armstrong Group knowingly violated FCC rules governing the High-Cost Program from 2008 to 2023. According to the allegations, five incumbent local exchange carriers (ILECs) owned by Armstrong Group submitted improper cost reports for the purpose of inflating the subsidies they received from the USF. These actions resulted in Armstrong Group obtaining greater subsidy payments than they were entitled to.

Background on the High-Cost Program

The Universal Service Fund is a system of telecommunications subsidies and fees designed to promote universal access to telecommunications services in the United States. The FCC established the USF to ensure that all Americans have access to robust and reasonably priced communications services. The fund was established as part of the Telecommunications Act of 1996, and it supports four major programs: High-Cost Program, Low-Income Support Program, E-Rate Program, and Rural Health Care Program.

The High-Cost Program specifically aims to provide modern communications networks to consumers in rural, insular, and high-cost areas. By offering federal funds to eligible telecommunications carriers, the program seeks to make voice and broadband services accessible and affordable for everyone, regardless of geographic location.

Whistleblower Involvement

Under the qui tam or whistleblower provisions of the False Claims Act, the Armstrong Group’s former Controller filed suit on behalf of the United States. Whistleblowers can receive between 15-25% of the government’s recovery in a successful qui tam action.

Corporate Compliance Agreement

Alongside the civil settlement, the Armstrong Group has entered into a corporate compliance agreement with the FCC, holding the telecommunications company accountable for improving its internal controls for compliance. The General Counsel for the FCC said about the case, “In the digital age, it is critical for everyone, everywhere to have access to reliable, high-speed broadband, including in rural and underserved areas. That is why we are laser-focused on pursuing waste, fraud, and abuse in these critical programs and ensuring that available funds flow to companies that play by the rules.” The FCC’s Inspector General added, “Carriers receiving support from the USF or any FCC benefit program must understand that actions undermining the claims process will not be tolerated and will be investigated vigorously.”

Conclusion

The $6.5 million settlement between Armstrong Group and the United States highlights the serious consequences of violating FCC regulations and the False Claims Act. It also underscores the vital role that whistleblowers play in maintaining the integrity of federal programs. Telecommunications industry insiders should take note of this case and ensure their own compliance practices are robust and thoroughly monitored.