Butler, Pennsylvania, based Armstrong Group has agreed to pay $6.5 million to resolve allegations that it violated the False Claims Act by knowingly violating the Federal Communications Commission’s (FCC) rules governing the agency’s High-Cost Program and submitting improper costs to inflate the subsidies it received from the federal Universal Service Fund (USF).
The FCC established the USF to help ensure that all people in the United States can access rapid, efficient, nationwide communications service with adequate facilities at reasonable charges.
The High-Cost Program is one of four programs that comprise the USF and aims to ensure that consumers in rural, insular, and high-cost areas have access to modern communications networks capable of providing reasonably comparable voice and broadband service, both fixed and mobile at rates that are reasonably comparable to those in urban areas.
In pursuit of that goal, the High-Cost Program provides federal funds to qualified eligible telecommunications carriers, including incumbent local exchange carriers (ILECs), that receive subsidies to expand connectivity infrastructure within the U.S.
The U.S. alleged that, between 2008 and 2023, five ILECs owned by Armstrong Group (Armstrong Telephone Company – Maryland, Armstrong Telephone Company – New York, Armstrong Telephone Company – Northern Division, Armstrong Telephone Company – Pennsylvania, and Armstrong Telephone Company – West Virginia) failed to comply with FCC regulations that governed what costs they were allowed to report for purposes of claiming subsidy payments from the government, and as a result these companies received greater subsidy payments than those to which they were entitled.
“Telecommunications providers that seek to participate in important FCC programs like the High-Cost Program must comply with applicable rules, including those governing how they report the costs used to calculate their subsidies,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division.
“When providers like the Armstrong Group fail to follow federal law and FCC regulations, they jeopardize not only critical government programs but also consumers’ ability to access a modern lifeline — rapid, reliable, and efficient telecommunications services,” said U.S. Attorney Eric G. Olshan for the Western District of Pennsylvania.
“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,” said Inspector General Fara Damelin of the FCC.
Contemporaneous with the civil settlement, Armstrong Group has entered into a robust corporate compliance agreement with the FCC, requiring Armstrong to adopt concrete changes in the company’s internal controls and implement comprehensive oversight and monitoring mechanisms.
The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by James Ranko, Armstrong Group’s former Controller.
Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any subsequent recovery. The qui tam case is captioned U.S. ex rel. Ranko v. Armstrong Group of Companies, et. al., Case No. 17-1052 (W.D. Pa.). The whistleblower will receive $1,267,500 as his share of the recovery.
The claims resolved by the settlement are allegations only. There has been no determination of liability.
