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Before the
Federal Communications Commission
Washington, D.C. 20554
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)
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In the Matter of File No. EB-07-IH-3985
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VCI Company NAL/Acct. No. 200732080033
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Apparent Liability for Forfeiture FRN No. 0015783004
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)
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NOTICE OF APPARENT LIABILITY FOR FORFEITURE AND ORDER
Adopted: August 14, 2007 Released: August 15, 2007
By the Commission:
I. INTRODUCTION
1. In this Notice of Apparent Liability for Forfeiture ("NAL"), we find
that VCI Company ("VCI") apparently violated sections 54.407(c) and
54.413(b) of the rules of the Federal Communications Commission
("Commission") by willingly or repeatedly failing to keep and provide
to the Universal Service Administrative Company ("USAC") accurate
records of the revenues it was forgoing in providing Lifeline and Link
Up service. In addition, we find that VCI apparently violated sections
54.407(b) and 54.413(a) of the Commission's rules by willfully or
repeatedly receiving duplicate reimbursement for qualifying low-income
consumers served. Based on our review of the facts and circumstances
surrounding this matter, we find that VCI is apparently liable for a
total forfeiture of $1,047,500. Furthermore, we order VCI to submit
within 30 days to USAC revised Form 497s excluding all requests for
duplicate universal service reimbursement for qualifying low-income
customers served from August 2004 to August 2007.
II. BACKGROUND
2. Under section 254 of the Communications Act of 1934, as amended (the
"Act"), Congress promoted access to telecommunications service for all
consumers and required the Commission to establish rules governing the
services to be supported by the Federal universal service fund support
mechanisms. Section 254(b) establishes principles upon which the
Commission must base its policies for the preservation and advancement
of universal service. One of these principles states that "consumers
in all regions of the Nation, including low-income consumers...,
should have access to telecommunications and information services ...
that are reasonably comparable to those services provided in urban
areas and that are available at rates that are reasonably comparable
to rates charged in urban areas." As we have stated previously,
"these principles also recognize that ensuring rates are affordable is
a national priority."
3. The Commission implemented Part 54 of its rules in response to this
statutory mandate and promulgated various universal service support
mechanisms, including mechanisms providing financial support to
schools and libraries, rural healthcare providers, and carriers
providing service to high cost and low-income users. Under the
low-income support mechanism, the Lifeline Assistance ("Lifeline") and
Lifeline Connection Assistance ("Link Up") programs provide discounts
to qualifying low-income consumers for basic telephone service.
Lifeline provides low-income consumers with discounts off the monthly
cost of telephone service for a single telephone line in their
principal residence. In addition, qualifying low-income consumers have
the option to elect at the initiation of service Toll Limitation
Service ("TLS") to be included as part of Lifeline at no extra charge.
Link Up provides qualifying low-income consumers with discounts from
the initial costs of installing telephone service. The low-income
mechanism allows an eligible telecommunications carrier ("ETC")
providing services to qualifying low-income consumers to seek and
receive reimbursement for revenues it forgoes as a result. In order
for a carrier to receive low-income support, the carrier first must be
designated as an ETC.
4. As part of the framework for these programs, the Commission
established explicit requirements that ETCs must meet to receive
federal low-income support. Under sections 54.407 and 54.413 of the
Commission's rules, an ETC may receive universal service support
directly from USAC based on the number of qualifying low-income
consumers it serves in the form of a reimbursement of the revenues it
forgoes in providing Lifeline and Link Up services. Moreover, the
Commission has established that low-income consumers may receive
support only for "a single telephone line in their principal
residence." In order to receive reimbursement for such support, an ETC
"must keep accurate records of the revenues it forgoes in providing
Lifeline...." The Commission's rules further require that "[s]uch
records shall be kept in the form directed by [USAC] and provided to
[USAC] at intervals as directed...." As a result, an ETC seeks
reimbursement from USAC for the revenues it forgoes in provisioning
Lifeline to qualifying low-income consumers by submitting a Form 497
for each state in which it seeks reimbursement and for each month in
which it has forgone revenues.
5. The Commission's rules governing reimbursement for Link Up services
are very similar to those governing the Lifeline program. That is, to
receive reimbursement for Link Up, an ETC must keep accurate records
of the revenues it forgoes in reducing the customary charge for
commencing telecommunications service and its records must be kept in
the form directed by and provided to USAC. As with the Lifeline
program, an ETC thus seeks reimbursement from USAC for the revenues it
forgoes in provisioning Link Up by submitting a Form 497 for each
state and month.
6. VCI is a privately held company that provides telecommunications
services predominantly to low-income consumers. The company was
incorporated in the State of Washington on November 24, 2003 and has
operated or obtained authority to operate in 15 states. VCI has been
certified as an ETC in all 15 states and thus qualifies for the
receipt of low-income support directly from USAC. VCI currently
provides Lifeline, Link Up and TLS services in twelve states,
including Minnesota. VCI relinquished ETC status and ceased all
telecommunications service operations in Washington on January 11,
2007 and in Oregon on February 1, 2007. VCI provides services directly
to end users using its own facilities as well as by reselling service
initially provided by other carriers.
7. In addition to federal low-income support, VCI is also eligible to
receive state low-income support in states such as Minnesota, Oregon,
and Washington that established their own programs providing
additional support to low-income consumers in their states. Oregon and
Washington have established their own state eligibility criteria for
qualifying low-income consumers that resemble the federal low-income
program, while Minnesota has adopted the federal criteria. ETCs such
as VCI may participate in both the federal and state programs.
8. In June 2006, USAC began an audit review of VCI's December 2005 claims
for federal low-income support in Oregon. During the audit, USAC
informed VCI that it believed VCI was submitting duplicate requests
for reimbursement of low-income support. VCI did not dispute USAC's
finding or the Lifeline and Link Up duplicate line data underlying
that finding. USAC ultimately found at the conclusion of the audit
that in December 2005 VCI submitted a request for reimbursement for
duplicate telephone numbers and addresses in Oregon for which it was
not eligible.
9. In or about August 2006, the Oregon Telephone Assistance Program
("OTAP"), the administrator of the Oregon state low-income programs,
conducted an audit into VCI's submissions seeking Oregon state
low-income support. The OTAP found that VCI submitted telephone
numbers twice or even three times on the same monthly form seeking
low-income support. In total, OTAP determined that VCI had submitted
more than 1,800 duplicate requests for support in Oregon from June
2004 through March 2006. As a result, OTAP denied the duplicate
requests submitted by VCI. The OTAP administrator informed VCI of
these findings by e-mail in August 2006 and again in a November 2006
Staff Report. Following the OTAP inquiry, on December 8, 2006, the
Oregon Public Utility Commission ("OPUC") opened a formal
investigation into, among other things, VCI's duplicate billings for
Oregon state low-income support. These duplicate billings apparently
were also included in VCI's claims for federal low-income support.
Despite the multiple inquiries from state and federal regulatory
agencies seeking information about its submissions for low-income
support, particularly its submission of duplicate requests for support
to state and federal agencies, VCI has failed to revise any of the
Form 497s filed with USAC to account for its duplicate low-income
support requests.
10. On May 25, 2007 and July 3, 2007, the Enforcement Bureau ("Bureau")
sent Letters of Inquiry to VCI inquiring into the company's claims for
low-income support, primarily in Minnesota, Oregon, and Washington.
VCI submitted its responses to the Bureau inquiry letters on June 13,
2007, June 21, 2007 and July 12, 2007. VCI's responses demonstrate
that in Minnesota, Oregon and Washington the company received
reimbursement to which it was not entitled by including duplicate
telephone numbers and addresses in the total line counts for Lifeline,
Link Up, and TLS support on Form 497s submitted to USAC.
11. Under section 503(b)(1) of the Act, any person who is determined by
the Commission to have willfully or repeatedly failed to comply with
any provision of the Act or any rule, regulation, or order issued by
the Commission shall be liable to the United States for a forfeiture
penalty. Section 312(f)(1) of the Act defines willful as "the
conscious and deliberate commission or omission of [any] act,
irrespective of any intent to violate" the law. The legislative
history to section 312(f)(1) of the Act clarifies that this definition
of willful applies to both sections 312 and 503(b) of the Act and the
Commission has so interpreted the term in the section 503(b) context.
The Commission may also assess a forfeiture for violations that are
merely repeated, and not willful. "Repeated" means that the act was
committed or omitted more than once, or lasts more than one day. To
impose such a forfeiture penalty, the Commission must issue a notice
of apparent liability and the person against whom the notice has been
issued must have an opportunity to show, in writing, why no such
forfeiture penalty should be imposed. The Commission will then issue
forfeiture if it finds by a preponderance of the evidence that the
person has violated the Act or a Commission rule.
12. We conclude under this standard that VCI is apparently liable for a
forfeiture for its apparent willful or repeated violations of sections
54.407(b), 54.407(c), 54.413(b) and 54.413(a) of the Commission's
rules by filing inaccurate Form 497s with USAC seeking duplicate
low-income support reimbursement and as a result receiving low-income
support to which it was not entitled. Based on a preponderance of the
evidence, we find that VCI engaged in a consistent and sustained
practice of submitting duplicate requests for reimbursement to USAC
and that it consequently received significant support to which it was
not entitled. We therefore propose a forfeiture in the amount of
$1,047,500 against VCI for these apparent violations.
III. DISCUSSION
A. VCI Apparently Violated Sections 54.407(c) and 54.413(b) of the
Commission's Rules By Submitting Inaccurate Information To USAC
13. The record establishes that VCI failed to maintain accurate records of
revenues it was forgoing, as evidenced by its repeated submission of
Form 497s that contained duplicate ineligible requests for
reimbursement. Moreover, based on the evidence developed in this
investigation, we determine that VCI included thousands of duplicate
entries in the total line counts for Lifeline, Link Up, and TLS
support on its Form 497 submissions from October 2005 through March
2007 to USAC for service provided in Minnesota, Oregon, and
Washington. Consequently, VCI received excessive monthly low-income
reimbursements continuing from November 2005 until April 2007.
14. VCI does not dispute the violative, erroneous submissions, but instead
merely blames them on a faulty computer system. Specifically, VCI
claims that when culling data for submissions to USAC, its system
captured only the low-income customer's social security number and
failed to eliminate any duplicate customer telephone numbers or
addresses. As a result, when VCI collected information about its
eligible consumers for its Form 497 submissions to USAC, it included
duplicate requests for reimbursement. Because reimbursement of
low-income support is limited to revenues that VCI was forgoing in
provisioning a single telephone line per principal residence for each
qualified low-income consumer, VCI is required to eliminate duplicate
entries, including duplicate telephone numbers or addresses, in
seeking full reimbursement for the qualified customer on each Form
497. VCI admits that "utilizing two additional customer identifiers,
telephone number and address" in the system in addition to the social
security number would allow the company to identify these
inaccuracies. VCI failed to implement such a compliance measure,
however, and continued its conduct in spite of the State of Oregon's
and USAC's investigations beginning in or around August 2006 of its
practices, and actions by both regulatory authorities to disallow or
require repayment of low-income support. VCI did not correct this
faulty system until May 2007. Accordingly, we conclude that VCI
apparently willfully or repeatedly violated sections 54.407(c) and
54.413(b) by filing inaccurate Form 497s with USAC between October
2005 and November 2006 for its service in Oregon and Washington and by
filing inaccurate Form 497s with USAC between December 2005 and March
2007 for its service in Minnesota.
A. VCI Apparently Violated Sections 54.407(b) and 54.413(a) By
Collecting Lifeline and Link Up Support To Which It Was Not Entitled
15. VCI admits that it received duplicate reimbursement from November 2005
through April 2007 for the same telephone number or address on
thousands of lines provisioned in Minnesota, Oregon, and Washington.
From November 2005 through December 2006, VCI received support for
8,217 Lifeline and 2,050 Link Up duplicate telephone numbers or
addresses for service in these states. After VCI ceased providing
service in Oregon and Washington, VCI continued to receive
reimbursement of Lifeline support for another 448 duplicate telephone
numbers or addresses from January 2007 through April 2007 for service
in Minnesota alone. VCI has neither attempted to return the excess
reimbursements to USAC, nor explained its failure to do so.
Accordingly, we conclude that VCI apparently willfully or repeatedly
violated section 54.407(b) by collecting reimbursements each month
from November 2005 through December 2006 for Lifeline support in
Oregon and Washington and by collecting reimbursements each month from
January 2006 through April 2007 for Lifeline support in Minnesota. We
also conclude that VCI apparently willfully or repeatedly violated
section 54.413(a) by collecting reimbursements for Link Up support
each month from November 2005 through December 2006 in Oregon and
Washington and each month from January 2006 through December 2006 in
Minnesota to which it was not entitled under our rules.
A. Proposed Forfeiture
16. Section 503(b)(2)(B) of the Act authorizes the Commission to assess a
forfeiture of up to $130,000 for each violation or each day of a
continuing violation, up to a statutory maximum of $1,325,000 for a
single act or failure to act. In determining the appropriate
forfeiture amount, we consider the factors enumerated in section
503(b)(2)(D) of the Act, including "the nature, circumstances, extent
and gravity of the violation, and, with respect to the violator, the
degree of culpability, any history of prior offenses, ability to pay,
and such other matters as justice may require."
17. The Commission has not established a base forfeiture amount for the
submission of inaccurate requests for universal service support in
violation of sections 54.407(c) or 54.413(b) of our rules. We find
that a significant forfeiture amount is appropriate. Administering the
low-income program is an intensive undertaking that requires
determining that each carrier seeking low-income reimbursement has met
all of the Commission's requirements and submitted complete and
accurate submissions. If an ETC ignores our rules and submits
information that is consistently inaccurate, it undermines the
low-income reimbursement mechanism and the universal service program
altogether.
18. In this respect, an ETC's filing of inaccurate requests for low-income
reimbursement is similar to a carrier's failure to provide accurate
revenue information to USAC for the assessment of the carrier's
universal service fund contributions. As with the universal service
fund contributions cases, we set base forfeiture amounts here that
reflect USAC's need to receive consistently accurate and reliable
information from carriers. We have established $50,000 as the base
forfeiture amount for a carrier's failure to file accurate revenue
information with USAC. Carriers provide that information in most cases
on a quarterly basis via FCC Form 499. A comparable amount should
apply to the filing of inaccurate low-income reimbursement requests,
adjusted to reflect the fact that ETCs file FCC Form 497 on a monthly
basis. Accordingly, we establish $20,000 per form as the base
forfeiture amount for the filing of inaccurate requests for
reimbursement under the low-income program, in violation of sections
54.407(c) and 54.413(b) of the Commission's rules.
19. VCI admits it filed inaccurate Form 497s seeking reimbursement in
Oregon and Washington from October 2005 through November 2006, and
filed inaccurate forms seeking reimbursement in Minnesota from
December 2005 through March 2007. VCI continued to submit these
inaccurate reports in spite of state and federal regulatory
investigations of its practices and regulatory actions to disallow or
require repayment of low-income support. Moreover, VCI has steadfastly
refused to refile or file revised requests for support that did not
contain duplications.
20. The Commission has not previously determined whether an ETC's failure
to file an accurate Form 497 is a continuing violation under section
503(b)(2)(B). We find that a carrier's failure to file an accurate
form (or failure to file a form) has a continuing harmful impact on
the Universal Service Fund and other related regulatory obligations.
In this instance, VCI received and continued to benefit from excessive
funds that USAC disbursed as a direct result of VCI's inaccurate form.
We therefore conclude that VCI's failure to file accurate Form 497s
constitutes a continuing violation as to which the one year statute of
limitations for forfeiture in section 503(b)(6)(B) does not begin to
run until the violation is cured. We recognize that the Globcom Order
suggested that the statute of limitations begins to run on the date a
form was filed (or due) and bars a forfeiture issued more than one
year later. We disagree with that finding. Nevertheless, because we
are changing course in this order by finding a continuing violation
for the failure to file accurate Form 497s, we exercise our
prosecutorial discretion here and decline to propose forfeitures for
VCI's failures to file Form 497s more than one year prior to the date
of the NAL. We caution VCI and other carriers that future enforcement
actions may consider all failures to file forms with USAC, including
Telecommunications Reporting Worksheets, as continuing violations
subject to forfeiture action.
21. For the reasons discussed above, we conclude that VCI is apparently
liable for a $20,000 forfeiture for each inaccurate Form 497 filed
within the past year. VCI submitted to USAC sixteen inaccurate Form
497s from August 2006 through March 2007. Accordingly, we propose a
$320,000 forfeiture for VCI's sixteen apparent violations of sections
54.407(c) and 54.413(b) of the Commission's rules.
22. As with the provision of inaccurate information in requests for
low-income reimbursements, the Commission has not established a base
forfeiture for the unlawful receipt of Lifeline and TLS reimbursements
in violation of section 54.407(b) of our rules. Once again, we find
that a significant forfeiture amount is justified. Congress explicitly
designated the provision of service to low-income consumers one of the
key principles upon which the Commission should base its universal
service policies. When an ETC receives Lifeline support to which it is
not entitled, however, it undermines this national priority and
ultimately threatens to deprive low-income consumers of the essential
telecommunications and information services to which they are
entitled.
23. In another context, when addressing carriers that fail to comply with
recurring universal service contribution obligations, we have imposed
significant forfeitures. Specifically, we have proposed a base
forfeiture of $20,000 for each month in which a carrier has failed to
pay its USF contribution. We believe a similar approach is warranted
here. In both cases, a carrier has unlawfully deprived the USF of
funds at the expense of innocent third parties. We therefore find it
appropriate to impose a $20,000 base forfeiture for each month in
which an ETC, in violation of section 54.407(b), receives Lifeline
support to which it is not entitled.
24. From November 2005 through April 2007, VCI admits that it received
duplicate Lifeline and TLS reimbursement for 8,665 lines as a result
of submitting duplicate telephone numbers, duplicate addresses and, in
some cases, both. The Commission's rules allow an ETC to seek
reimbursement from USAC for revenues it forgoes in providing services
to low-income consumers but section 54.407(b) limits the amount of
Lifeline support to "reimbursement for each qualifying low-income
consumer served." VCI was thus precluded from obtaining reimbursement
for a qualifying consumer more than once a month. Despite this
restriction, as explained above, VCI received about $114,000 in
Lifeline and TLS support as reimbursement for services it did not
provide. Each monthly receipt of excess support constitutes a
continuing violation that continues until the ETC has returned the
funds to USAC. VCI received excessive support in eighteen months from
November 2005 continuing until April 2007. We propose a base
forfeiture of $360,000 for VCI's eighteen apparent violations of
section 54.407(b).
25. Additionally, given the gravity of the harm here, we also find an
upward adjustment is appropriate. In our USF contribution enforcement
items, we upwardly adjust the forfeiture by one-half of the carrier's
balance due to USAC. We conclude that imposing such an upward
adjustment in this situation would adequately punish VCI for its
actions at issue here as well as deter other ETCs from seeking
excessive support. As we have repeatedly observed, such an upward
adjustment of the forfeiture "illustrate[s] that a delinquent
carrier's culpability and the consequential damage it causes to the
goal of universal service may vary with the size of the contribution
it fails to make." We find that it is equally important to consider
the damage caused by an ETC's receipt of excessive support.
Accordingly, we find that an upward adjustment representing one-half
the excessive funds received is proper. Beginning November 2005 and
continuing through the receipt of its reimbursement support from USAC
in April 2007, VCI received $114,000 in low-income Lifeline and TLS
support to which it was not entitled as a result of seeking
reimbursement for duplicate telephone numbers, addresses or both.
Adding half of that amount to the proposed base forfeiture amount
results in a total proposed forfeiture of $417,000 for VCI's apparent
violation of section 54.407(b).
26. Finally, the Commission has also yet to establish a base forfeiture
for the unlawful receipt of Link Up reimbursements in violation of
section 54.413(a) of our rules. As above, we find that a significant
forfeiture amount is justified. In another context, when addressing
carriers that fail to comply with regulatory contribution obligations,
we have imposed significant forfeitures. Specifically, we have
proposed a base forfeiture of $20,000 for each month in which a
carrier has failed to pay its USF contribution. We believe a similar
approach is warranted here. In both cases, a carrier has unlawfully
deprived the USF of funds, at the expense of innocent third parties.
We therefore find it appropriate to impose a $20,000 base forfeiture
for each month in which an ETC, in violation of section 54.413(a),
receives Link Up support to which it is not entitled.
27. From November 2005 through December 2006, VCI admits that it received
duplicate Link Up reimbursement for 2,050 lines as a result of
submitting duplicate telephone numbers, duplicate addresses and, in
some cases, both. The Commission's rules allow an ETC to seek
reimbursement from USAC for revenues it forgoes in providing services
to low-income consumers but section 54.413(a) limits the amount of
Link Up support to "the difference between the carrier's customary
connection or interest charges and the charges actually assessed to
the participating low-income consumer." Moreover, our rules and orders
have explicitly stated that low-income consumers may receive support
only for a single telephone line in their principal residence. VCI was
thus precluded from obtaining reimbursement for a qualifying consumer
more than once. Despite this restriction, as explained above, VCI
received about $61,000 in Link Up support as reimbursement for
services it did not provide. Each monthly receipt of excess support
constitutes a continuing violation that continues until the ETC has
returned the funds to USAC. VCI received excessive Link Up support for
fourteen months from November 2005 continuing through December 2006.
We therefore propose a base forfeiture of $280,000 for VCI's fourteen
apparent violations of section 54.413(a).
28. For the reasons stated in our discussion of VCI's apparent violations
of section 54.407(b), we also propose an upward adjustment of one-half
the amount of excess Link Up support received by VCI. Beginning
November 2005 and continuing through the receipt of its reimbursement
support from USAC in December 2006, VCI received approximately $61,000
in Link Up support to which it was not entitled as a result of seeking
reimbursement for duplicate telephone numbers, addresses or both.
Adding half of that amount to the proposed base forfeiture amount
results in a total proposed forfeiture of $310,500 for VCI's apparent
violation of section 54.413(a).
IV. Conclusion
29. We conclude that VCI is apparently liable for the following proposed
forfeitures: (1) $320,000 for failure to file accurate form 497s of
the revenues it was forgoing in providing low-income service; (2)
$417,000 for unlawful receipt of excessive reimbursement for Lifeline
support; and (3) $310,500 for unlawful receipt of excessive
reimbursement for Link Up support. In sum, we hold that VCI is
apparently liable for a total forfeiture of $1,047,500. Further
violations of the Commission's rules governing the filing of accurate
information seeking reimbursement and receipt of low-income support
will constitute additional violations subjecting VCI to possible
increased enforcement action. Such enforcement action could take the
form of higher forfeitures. In addition, the Commission may suspend
support disbursements to an ETC or revoke the carrier's designation as
an ETC upon evidence that indicates the carrier is no longer in
compliance with the Commission's criteria for ETC designation.
30. We warn carriers that if the forfeiture methodologies described herein
are not adequate to deter violations of our USF rules, our statutory
authority permits the imposition of much larger penalties and we will
not hesitate to impose them as circumstances require.
V. ORDERING CLAUSES
31. ACCORDINGLY, IT IS ORDERED THAT, pursuant to section 503(b) of the
Communications Act of 1934, as amended, 47 U.S.C. S: 503(b), and
section 1.80 of the Commission's rules, 47 C.F.R. S: 1.80, that VCI is
hereby NOTIFIED of its APPARENT LIABILITY FOR A FORFEITURE in the
amount of $1,047,000 for willfully or repeatedly violating the
Commission's rules.
32. IT IS FURTHER ORDERED THAT, pursuant to section 1.80 of the
Commission's Rules, within thirty days of the release date of this
NOTICE OF APPARENT LIABILITY, VCI SHALL PAY the full amount of the
proposed forfeiture or SHALL FILE a written statement seeking
reduction or cancellation of the proposed forfeiture.
33. IT IS FURTHER ORDERED THAT, pursuant to sections 4(i) of the Act, and
sections 54.407(c) and 54.413(b) of the Commission's rules, within
thirty days of the release of this NOTICE OF APPARENT LIABILITY AND
ORDER, VCI SHALL SUBMIT to USAC revised FCC Form 497s excluding all
requests for duplicate universal service reimbursement for qualifying
low-income customers served from August 2004 to August 2007.
34. Payment of the forfeiture must be made by check or similar instrument,
payable to the order of the Federal Communications Commission. The
payment must include the NAL/Acct. No. and FRN No. referenced above.
Payment by check or money order may be mailed to Federal
Communications Commission, P.O. Box 358340, Pittsburgh, PA
15251-8340. Payment by overnight mail may be sent to Mellon
Bank /LB 358340, 500 Ross Street, Room 1540670, Pittsburgh, PA 15251.
Payment by wire transfer may be made to ABA Number 043000261,
receiving bank Mellon Bank, and account number 9116229.
35. The response, if any, to this NOTICE OF APPARENT LIABILITY must be
mailed to Hillary S. DeNigro, Chief, Investigations and Hearings
Division, Enforcement Bureau, Federal Communications Commission, 445
12th Street, S.W., Room 4-C330, Washington, D.C. 20554 and must
include the NAL/Acct. No. referenced above.
36. The Commission will not consider reducing or canceling a forfeiture in
response to a claim of inability to pay unless the petitioner submits:
(1) federal tax returns for the most recent three-year period; (2)
financial statements prepared according to generally accepted
accounting practices (GAAP); or (3) some other reliable and objective
documentation that accurately reflects the petitioner's current
financial status. Any claim of inability to pay must specifically
identify the basis for the claim by reference to the financial
documentation submitted.
37. Requests for payment of the full amount of this NOTICE OF APPARENT
LIABILITY FOR FORFEITURE under an installment plan should be sent to
Deputy Chief Financial Officer, Federal Communications Commission,
Room 1-A637, 445 12th Street, S.W., Washington, D.C. 20554.
38. IT IS FURTHER ORDERED that a copy of this NOTICE OF APPARENT LIABILITY
FOR FORFEITURE shall be sent by certified mail, return receipt
requested, to B. Lynn F. Ratnavale, Lukas, Nace, Gutierrez & Sachs,
1650 Tysons Boulevard, Suite 1500, McLean, Virginia, 22102.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
47 C.F.R. S:S: 54.407(c) and 54.413(b).
47 C.F.R. S:S: 54.407(b) and 54.413(a).
Section 54.417 of the Commission's rules requires that eligible
telecommunications carriers maintain records to document compliance with
all federal and state requirements governing Lifeline and Link Up for
three years. See 47 C.F.R. S: 54.417(a).
47 U.S.C. S: 254(a)(2).
47 U.S.C. S: 254(b)(3).
Lifeline and Link Up, Report and Order and Further Notice of Proposed
Rulemaking, 19 FCC Rcd 8302, 8305, P: 3 (2004) ("2004 Lifeline Order").
See generally Federal-State Joint Board on Universal Service, Report and
Order, 12 FCC Rcd 8776 (1997) ("1997 Universal Service Order").
The Commission adopted Lifeline and Link Up prior to the passage of the
Telecommunications Act of 1996 pursuant to its general authority under
sections 1, 4(i), 201, and 205 of the Act. See 1997 Universal Service
Order, 12 FCC Rcd 8952-53, P: 341; 2004 Lifeline Order, 19 FCC Rcd at
8306, P: 4. See also Telecommunications Act of 1996, Pub.L. No., 104-104,
110 Stat. 56 (1996).
47 C.F.R. S: 54.401(a)(2); 1997 Universal Service Order, 12 FCC Rcd at
8957, P: 341; 2004 Lifeline Order, 19 FCC Rcd at 8306, P: 4.
47 C.F.R. S: 54.401(a)(3); 1997 Universal Service Order, 12 FCC Rcd at
8980, P: 385.
See 47 C.F.R. S: 54.411(a)(1).
See 47 C.F.R. S:S: 54.407, 54.413.
47 U.S.C. S: 254(e) (providing that only ETCs designated pursuant section
214(e) of the Act, 47, C.F.R. S: 214(e), are eligible to receive specific
Federal universal service support); see also 47 U.S.C. S: 214(e) (setting
forth the requirements for ETC designation).
47 C.F.R. S:S: 54.407 and 54.413.
See 1997 Universal Service Order, 12 FCC Rcd at 8957, P: 341; 2004
Lifeline Order, 19 FCC Rcd at 8306, P: 4 (specifying that support for
Lifeline subscribers is for "a single telephone line in their principal
residence"). See also 47 C.F.R. S: 54.411(a)(1) (stating that Link Up
support is for "commencing telecommunications service for a single
telecommunications connection at a [qualified low-income] consumer's
principal place of residence"); 47 C.F.R. S: 54.411(c) (limiting Link Up
support to qualified low-income consumers "for a second or subsequent time
only for a principal place of residence with an address different from the
one which Link Up support was provided previously").
47 C.F.R. S: 54.407(c). The Commission has selected USAC as the
Administrator of the universal service fund, including the disbursement of
low-income support.
Id.
See Form 497 and Instructions.
47 C.F.R. S: 54.413(b).
See Form 497 and Instructions.
First LOI Response to Inquiry 3; Letter from Stacey A. Klinzman,
Regulatory Attorney, VCI Company, to Secretary, Federal Communications
Commission dated January 16, 2007 ("VCI is a competitive local exchange
provider that service[s] primarily low-income, residential customers with
federal and state subsidized Lifeline and Link Up services.").
First LOI Response at Exhibits A and B.
Id.
Id.
Section 54.201(d)(1) states that an ETC must offer services using its own
facilities or a combination of its own facilities and resale of another
company's service. 47 C.F.R. S: 54.201(d)(1).
See 2004 Lifeline Order, 19 FCC Rcd at 8306-7, P:P: 5-6.
See id., 19 FCC Rcd at 8355, Appendix G (providing that Minnesota has
adopted federal eligibility criteria).
See Letter from Karen Majcher, Vice President, High Cost & Low Income
Division, USAC to Stan Johnson, VCI Company, dated May 30, 2007 ("USAC
Recovery Letter").
See First LOI Response at Exhibit I, E-Mail from Michael Desrocher, Staff
Auditor, USAC to Stanley Johnson, VCI, August 25, 2006, (attaching
December 2005 duplicate Lifeline and Link Up line data); see also E-mail
from Stanley Johnson, VCI, to Michael Desrocher, Audit Staff, USAC, August
14, 2006, 4:26 PM (admitted that "two of the phone numbers on [the audit]
sample list were for the same [Lifeline] consumers").
See USAC Recovery Letter. USAC has subsequently recovered from VCI's
recent reimbursement the overpayment applied to VCI's December 2005
ineligible lines. See Id.
See E-mail from Julie Thompson, OTAP to Stanley Johnson, VCI, dated August
30, 2006 ("August 30, 2006 OTAP Billing Email").
Id.
Public Utility Commission of Oregon Staff Report from Vicki McLean,
Central Services Administrator, to the Public Utilities Commission,
Residential Service Protection Fund: Request to Open a Formal
Investigation of Vilaire Company Incorporated dba VCI, dated November 27,
2006 ("OTAP Staff Report"). VCI did not appeal the duplicate telephone
numbers findings in the company's response to the OTAP staff report. See
Letter from VCI to the OPUC dated December 1, 2006 in response to the OTAP
Staff Report.
See Vilaire Company Incorporated, dba VCI, Investigation Into Oregon
Telephone Assistance Program Billings, As Well As Revenue And Remittance
Reporting, Order (OTAP Dec. 8, 2006). ETCs such as VCI are eligible to
participate in both the federal and state programs.
First LOI Response at Exhibit J. The number of duplicate telephone numbers
found by OTAP in Oregon matched the total number of duplicate numbers that
VCI reported in its LOI response each month from September 2005 through
March 2006. Based on these facts, we conclude there is a preponderance of
the evidence that VCI submitted the same duplicate requests to USAC.
Letter from Trent B. Harkrader, Deputy Chief, Investigations and Hearings
Division, Enforcement Bureau, Federal Communications Commission, to
Stanley Johnson, VCI Company, dated May 25, 2007 ("May 25th LOI"); Letter
from Trent B. Harkrader, Deputy Chief, Investigations and Hearings
Division, Enforcement Bureau, Federal Communications Commission, to
Stanley Johnson, VCI Company, dated July 3, 2007 ("July 3rd LOI").
Letter from B. Lynn F. Ratnavale, Lukas, Nace, Gutierrez & Sachs,
Chartered, Counsel for VCI Company, to Diana Lee, Attorney Advisor,
Investigations and Hearings Division, Enforcement Bureau, Federal
Communications Commission, dated June 13, 2007 (Response to Inquiries 1-5
and 6-10) ("First LOI Response").
Letter from B. Lynn F. Ratnavale, Lukas, Nace, Gutierrez & Sachs,
Chartered, Counsel for VCI Company, to Diana Lee, Attorney Advisor,
Investigations and Hearings Division, Enforcement Bureau, Federal
Communications Commission, dated June 27, 2007 (Response to Inquiry 6)
("Second LOI Response").
Letter from B. Lynn F. Ratnavale, Lukas, Nace, Gutierrez & Sachs,
Chartered, Counsel for VCI Company, to Diana Lee, Attorney Advisor,
Investigations and Hearings Division, Enforcement Bureau, Federal
Communications Commission, dated July 12, 2007 ("Third LOI Response").
47 U.S.C. S: 503(b)(1)(B); 47 C.F.R. S: 1.80(a)(1); see also 47 U.S.C. S:
503(b)(1)(D) (forfeitures for violation of 14 U.S.C. S: 1464).
47 U.S.C. S: 312(f)(1).
H.R. Rep. No. 97-765, 97th Cong. 2d Sess. 51 (1982).
See, e.g., Application for Review of Southern California Broadcasting Co.,
Memorandum Opinion and Order, 6 FCC Rcd 4387, 4388 (1991) ("Southern
California Broadcasting Co.").
See, e.g., Callais Cablevision, Inc., Grand Isle, Louisiana, Notice of
Apparent Liability for Monetary Forfeiture, 16 FCC Rcd 1359, 1362, P: 10
(2001) ("Callais Cablevision") (issuing a Notice of Apparent Liability
for, inter alia, a cable television operator's repeated signal leakage).
Southern California Broadcasting Co., 6 FCC Rcd at 4388, P: 5; Callais
Cablevision, Inc., 16 FCC Rcd at 1362, P: 9.
47 U.S.C. S: 503(b); 47 C.F.R. S: 1.80(f).
See, e.g., SBC Communications, Inc., Forfeiture Order, 17 FCC Rcd 7589,
7591, P: 4 (2002) (forfeiture paid).
See First LOI Response, Exhibit J; First LOI Response, Response to Inquiry
15(d); Third LOI Response, Response to Inquiries 44-45.
First LOI Response, Exhibit J; Third LOI Response at Exhibit R. USAC
transmits monthly low-income payment to VCI one month after VCI submits
the Form 497. USAC thus disbursed monthly low-income reimbursements to VCI
for service provided from September 2005 through February 2007 in each of
the respective months from November 2005 through April 2007. See id.
VCI admitted that it initially designed a computer system that extracted
data using only the customer's social security number. VCI updated the
system to "utilize two additional customer identifiers, telephone number
and address," in May 2007 "to ensure that customer data is collected and
submitted correctly." First LOI Response, Response to Inquiry 15(d); see
also Third LOI Response, Response to Inquiry 44.
VCI used this system to support its reimbursement requests in all states
it provided service. Thus, in addition to submitting claims for
reimbursement for duplicate telephone numbers and addresses in Minnesota,
Oregon, and Washington, VCI also presumably did the same in other states
for which it sought reimbursement for support. We will review VCI's
actions in these other states in a separate investigation.
First LOI Response, Response to Inquiry 15(d).
See First LOI Response at Exhibit I.
Third LOI Response, Response to Inquiry 44.
See supra at n.49.
First LOI Response at Exhibit J.
VCI ceased providing service in Washington in January 11, 2007 and in
Oregon on February 1, 2007.
47 U.S.C. S: 503(b)(2)(B); see also 47 C.F.R. S: 1.80(b)(2); see also
Amendment of Section 1.80(b) of the Commission's Rules, Adjustment of
Forfeiture Maxima to Reflect Inflation, Order, 15 FCC Rcd 18221 (2000).
See, e.g., Local Phone Services, Inc., Notice of Apparent Liability for
Forfeiture, 21 FCC Rcd 9974, 9979, P: 14 (2006) ("Local Phone Services
NAL").
Carriers must also file once per year a Form 499-A reporting the previous
year's annual revenues.
See supra at n.49.
See, e.g., Globcom, Inc., Notice of Apparent Liability for Forfeiture and
Order, 18 FCC Rcd 19893, 19905, P: 34 (2003) (admonishing for failure to
file Form 499 more than one year prior to the NAL date).
As mentioned above, USAC requires an ETC seeking low-income reimbursement
to file a Form 497 for each state and month. VCI filed eight inaccurate
Form 497s from August 2006 through November 2006 for Oregon and
Washington, and eight inaccurate Form 497s from August 2006 through March
2007 for service in Minnesota.
47 U.S.C. S: 254(b)(3).
See, e.g., Local Phone Services NAL., 21 FCC Rcd at 9980, P: 15.
"Nonpayment of universal service contributions is an egregious offense
that bestows on delinquent carriers an unfair competitive advantage by
shifting to compliant carriers the economic costs and burdens associated
with universal service." Local Phone Services NAL, 21 FCC Rcd at 9979, P:
15.
First LOI Response at Exhibit J; Third LOI Response at Exhibit R.
47 C.F.R. S: 54.407(b).
In this respect, the unlawful receipt of USF monies resembles the failure
to pay USF contributions. See Globcom, Inc., Order of Forfeiture, 21 FCC
Rcd 4710, 4723, P: 35 n.105 (2006) ("Globcom Forfeiture Order") ("Each
failure to pay the amount due each month constituted a violation that
continued for more than 10 days); Matrix Telecom, Inc., Notice of
Apparent Liability, 15 FCC Rcd 13544 (2000); Conquest Operator Services
Corp., Order of Forfeiture, 14 FCC Rcd 12518, 12525, P: 16 (1999).
Moreover, USAC permits carriers seeking low-income support up to 27 months
to revise any Form 497s.
See, e.g., Local Phone Services NAL, 21 FCC Rcd at 9980, P: 16.
InPhonic, Inc., Order of Forfeiture and Further Notice of Apparent
Liability for Forfeiture, FCC 07-58 at P: 28 & n.87 (rel. May 3, 2007)
(citing cases).
See, e.g., Local Phone Services NAL, 21 FCC Rcd at 9980, P: 15.
First LOI Response at Exhibit J; Third LOI Response at Exhibit R.
47 C.F.R. S: 54.413(b).
See 1997 Universal Service Order, 12 FCC Rcd at 8957, P: 341; 2004
Lifeline Order, 19 FCC Rcd at 8306, P: 4; See also C.F.R. S:S:
54.411(a)(1), (c).
See supra n.69.
See, e.g., Federal-State Joint Board on Universal Service, Order, 20 FCC
Rcd 6371, 6402, P: 72 (2005).
See 47 C.F.R. S: 1.1914.
47 U.S.C. S: 4(i).
47 C.F.R. S:S: 54.407(c) and 54.413(b).
See 47 C.F.R. S: 1.1914.
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