GCI Communications has agreed to pay more than $40 million to resolve allegations that it violated the False Claims Act.

It allegedly did so by knowingly inflating its prices and violating Federal Communications Commission (FCC) competitive bidding regulations in connection with its 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.

Allegations Against GCI Communications

The U.S. government alleged that, between 2013 and 2020, GCI Communications failed to comply with FCC regulations that governed how telecommunications companies must calculate their prices for claiming subsidy payments. As a result, GCI Communications allegedly received greater subsidy payments than it was entitled to.

The U.S. further alleged GCI Communications caused Eastern Aleutian Tribes, a rural health care provider in Alaska, to agree to inflated prices after the relevant contract was competitively bid. As a result, GCI Communications knowingly received higher payments under the program from 2015 through 2018 in connection with its contract with Eastern Aleutian Tribes.

Justice Department’s Brian Boynton

“Telecommunications providers that seek to participate in important FCC programs like the Rural Health Care Program must comply with applicable rules, including those governing how they competitively bid on contracts and set their prices,” said Principal Deputy Assistant Attorney General Brian Boynton, head of the Justice Department’s Civil Division. “Today’s settlement demonstrates our continuing commitment to preventing the misuse of taxpayer funds.”

Settlement Should Deter Others

U.S. Attorney for the Western District of Washington Nick Brown said this $40 million settlement should deter other companies from “attempting to improperly enrich themselves by overcharging the government for important health care-related telecommunications services.”

GCI Communications has also agreed to enter into a corporate compliance agreement with the FCC. It will also resolve an FCC administrative investigation and an FCC proceeding arising from its participation in the Rural Health Care Program.

The civil settlement includes the resolution of claims brought under the whistleblower provisions of the False Claims Act by Robert Taylor, GCI Communications’ former director of business administration. The whistleblower will receive $6.4 million as his share of the recovery.

“Compliance with the Universal Service Fund’s Rural Health Care Program rules is a critical component in making sure that medical providers have access to the types of communications equipment and services needed to enhance medical options and care in rural communities,” said Loyaan Egal, FCC enforcement bureau chief. “This global settlement reflects our strong partnership with the Department of Justice in protecting the USF, and we thank them for their efforts in this particular case.”