Click here for Adobe Acrobat version
Click here for Microsoft Word version
********************************************************
NOTICE
********************************************************
This document was converted from Microsoft Word.
Content from the original version of the document such as
headers, footers, footnotes, endnotes, graphics, and page numbers
will not show up in this text version.
All text attributes such as bold, italic, underlining, etc. from the
original document will not show up in this text version.
Features of the original document layout such as
columns, tables, line and letter spacing, pagination, and margins
will not be preserved in the text version.
If you need the complete document, download the
Microsoft Word or Adobe Acrobat version.
*****************************************************************
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Easy Telephone Services d/b/a Easy Wireless
)
)
)
)
)
File No.: EB-IHD-13-00010590
NAL/Acct. No.: 201332080033
FRN: 0016344368
NOTICE OF APPARENT LIABILITY FOR FORFEITURE
Adopted: September 30, 2013 Released: September 30, 2013
By the Commission: Acting Chairwoman Clyburn and Commissioner Pai issuing separate statements.
INTRODUCTION
In this Notice of Apparent Liability for Forfeiture (NAL), we continue our commitment to combat waste, fraud, and abuse of the Lifeline program (Lifeline) by taking action and proposing monetary forfeitures against a company that has apparently ignored our rules and exploited a program dedicated to providing low-income Americans with basic telephone service. Specifically, we find that Easy Telephone Services d/b/a/ Easy Wireless (Easy Wireless) apparently willfully and repeatedly violated Sections 54.407, 54.409, and 54.410 of the Commission's rules by requesting and/or receiving support from the Lifeline program of the Universal Service Fund (USF or Fund) for 307 ineligible consumers for the month of September 2012. Based on our review of the facts and circumstances surrounding these apparent violations, we propose a monetary forfeiture in the amount of one million, five hundred eighty-six thousand, five hundred forty-five dollars ($1,586,545).
BACKGROUND
Lifeline Service. Lifeline is part of the USF and helps qualifying consumers have the opportunities and security that phone service brings, including being able to connect to jobs, family members, and emergency services. Lifeline service is provided by Eligible Telecommunications Carriers (ETCs) designated pursuant to the Communications Act of 1934, as amended (Act). An ETC may seek and receive reimbursement from the USF for revenues it forgoes in providing the discounted services to eligible customers in accordance with the rules. Section 54.403(a) of the Commission's rules specifies that an ETC may receive $9.25 per month for each qualifying low-income consumer receiving Lifeline service, and up to an additional $25 per month if the qualifying low-income consumer resides on Tribal lands. ETCs are required to pass these discounts along to eligible low-income consumers.
The Commission's Lifeline rules establish explicit requirements that ETCs must meet to receive federal Lifeline support. Section 54.407(a) of the rules requires that Lifeline support "shall be provided directly to an eligible telecommunications carrier, based on the number of actual qualifying low-income consumers it serves." Pursuant to Section 54.407(b) of the rules, an ETC may receive Lifeline support only for qualifying low-income consumers. A "qualifying low-income consumer" must meet the eligibility criteria set forth in Section 54.409 of the rules, including the requirement that he or she "must not already be receiving a Lifeline service," and must, pursuant to Section 54.410(d) of the rules, certify his/her eligibility to receive Lifeline service.
Section 54.410(a) of the Commission's rules requires further that ETCs have procedures in place "to ensure that their Lifeline subscribers are eligible to receive Lifeline services." As explained above, such eligibility requires that a consumer seeking Lifeline service may not already receive Lifeline service. This obligation therefore requires, among other steps, that an ETC search its own internal records to ensure that the ETC does not provide duplicate Lifeline service to any subscriber (an "intra-company duplicate").
The Commission's rules further prohibit an ETC from seeking reimbursement for providing Lifeline service to a subscriber unless the ETC has confirmed the subscriber's eligibility to receive Lifeline service. In accordance with Section 54.410, before an ETC may seek reimbursement, it must receive a certification of eligibility from the prospective subscriber that demonstrates that the subscriber meets the income-based and program-based eligibility criteria for receiving Lifeline service, and that the subscriber is not already receiving Lifeline service. As the foregoing discussion reveals, when an ETC seeks Lifeline service support reimbursement for a low-income consumer who already receives Lifeline service from that same ETC, that ETC has violated its obligation in the Commission's rules to confirm the subscriber's eligibility for Lifeline service.
ETCs that provide qualifying low-income consumers with Lifeline discounts file an FCC Form 497 with the Universal Service Administrative Company (USAC), either quarterly or monthly, to request support that reimburses them for providing service at the discounted rates. An ETC's FCC Form 497 documents the number of qualifying low-income customers served and the total amount of Lifeline support claimed by the ETC during the specified time period. Section 54.407(d) provides that an ETC may receive reimbursement from the Fund, however, only if it certifies as part of its reimbursement request that it is in compliance with the Lifeline rules. An ETC may revise its Form 497 data within 12 months after the data is submitted.
In addition to reviewing claims submitted by ETCs, USAC conducts in-depth data validations (IDVs) to further ensure compliance with the Lifeline rules. When a company is selected for an IDV, USAC will send the company a letter requesting subscriber data for a prior month or months. Once USAC receives the company's data, it analyzes the company's subscriber information to determine whether there are any duplicate subscribers and sends the company another letter with its initial results. USAC provides the company with an opportunity to submit a revised subscriber list to correct subscriber data or to remove subscribers that are no longer receiving service. If USAC determines that a low-income consumer is the recipient of multiple Lifeline benefits from that same ETC, it will send another letter to the ETC identifying the instances of intra-company duplicative support, seek a recovery, and notify the ETC that it must commence the deenrollment process for those duplicates.
Easy Wireless. Easy Wireless is a Florida corporation that provides wireless telephone services, predominantly to Lifeline customers. On November 17, 2011, the Oklahoma Corporation Commission (Oklahoma Commission) designated Easy Wireless as an ETC to provide wireless Lifeline service in Oklahoma.
USAC conducted an IDV of the Lifeline support requested by Easy Wireless for its Oklahoma subscribers for the month of September 2012 (September IDV). On March 4, 2013, USAC sent a letter to Easy Wireless informing the company that the September IDV revealed 307 individual intra-company duplicates among the subscribers for whom Easy Wireless had sought Lifeline support reimbursement. According to USAC, these 307 duplicate enrollments resulted in a request for $10,515 in overpayments from USAC.
DISCUSSION
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 a forfeiture if it finds, based on the evidence, that the person has violated the Act, or a Commission rule or Order.
Based on the record evidence developed in this investigation, we conclude that that Easy Wireless apparently willfully and repeatedly violated Sections 54.407, 54.409, and 54.410 of the rules by concurrently requesting Lifeline support reimbursement for 307 subscribers who were already receiving Easy Wireless Lifeline service. Based on the facts and circumstances before us, we therefore conclude that Easy Wireless is apparently liable for forfeiture penalties totaling $1,586,545.
Proposed FORFEITURE
For the violations at issue here, Section 503(b)(2)(B) of the Act authorizes the Commission to assess a forfeiture against a telecommunications carrier of up to $150,000 for each violation or each day of a continuing violation, up to a statutory maximum of $1,500,000 for a single act or failure to act. In determining the appropriate forfeiture amount, we consider the factors enumerated in Section 503(b)(2)(E) 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," as well as our forfeiture guidelines.
In calculating a proposed forfeiture, we are guided in part by VCI Company, a Notice of Apparent Liability for Forfeiture issued to a Lifeline provider that had apparently submitted inaccurate Form 497s to USAC and, as a result, collected support to which it was not entitled. In that case, the Commission analogized an inaccurate low-income reimbursement request on a Form 497 to the submission of inaccurate revenue information on a Form 499, and therefore adopted a forfeiture framework based on that utilized in USF contribution enforcement cases. In particular, in VCI, the Commission proposed a forfeiture methodology based on three components: (1) a base forfeiture of $20,000 for each inaccurate FCC Form 497 that VCI filed; (2) a base forfeiture of $20,000 for each month VCI received improper Lifeline support based on its inaccurate FCC Form 497 filings; and (3) an upward adjustment equal to half of VCI's aggregate Lifeline overcollection.
In this NAL, we preserve the basic components of VCI's three-part structure, but we adopt an approach to two of the forfeiture components that is better calibrated to address the harm that Easy Wireless's apparent conduct has caused to the Fund, and also to reflect the substantial reforms that the Commission has implemented to the Lifeline program since VCI was issued. In particular, the Commission in recent years has increased its emphasis on ETCs' responsibilities for preventing waste, fraud, and abuse in the Lifeline program and has adopted rules codifying the requirement that a subscriber may not receive more than one Lifeline supported service per household. If an ETC violates our rules and submits a request for Lifeline support that it knew or should have known includes ineligible subscribers, and thus requests and/or receives more reimbursement from the Fund than the amount to which it is properly entitled, it undermines the low-income support reimbursement mechanism. The Commission believes that the imposition of a significant forfeiture amount is a necessary response to Lifeline overcollection violations. Lifeline ETCs must expend the necessary company resources to ensure compliance with the Commission's Lifeline rules, especially the rules and procedures requiring that providers request and/or receive federal universal service support only for service provided to eligible consumers. Imposing a significant forfeiture on such rule violators should deter those service providers that fail to devote sufficient resources to ferreting out company practices resulting in overcollection violations. In addition, a significant forfeiture should achieve broader industry compliance with Lifeline rules that are critically important to the effective functioning of the Fund.
With respect to the first component, we preserve the VCI framework's base forfeiture of $20,000 for each instance in which an ETC files an FCC Form 497 that includes ineligible subscribers in the line count, which is a violation of the certification requirement contained in Section 54.407(d) of our rules. We believe that this base forfeiture amount continues to accurately reflect the need to ensure that USAC "receive[s] consistently accurate and reliable information from carriers."
With respect to the second component of the three-part structure, it remains appropriate for the forfeiture to reflect the improper Lifeline support sought and/or received from the Fund. However, we conclude that the VCI forfeiture framework should be reoriented to place greater emphasis on the number of ineligible subscribers for whom the ETC requests and/or receives reimbursement from the Fund. We are concerned that the prior framework fails to reflect the extent and gravity of the alleged violations. Accordingly, we adopt a base forfeiture of $5,000 for each ineligible subscriber for whom the ETC requests and/or receives support from the Fund in violation of Sections 54.407, 54.409, and 54.410 of our rules. We conclude that calculating the second component of the proposed forfeiture by reference to the number of ineligible subscribers, rather than to the duration of the violation, and imposing a forfeiture of $5,000 for each ineligible subscriber strikes an appropriate balance in light of our need to protect the Fund and send a clearer deterrent message to the industry. We are committed to strict enforcement of our rules and to taking all measures to root out waste, fraud, and abuse even for violations that are of short duration. Together with the first component, this revised structure takes into consideration both the duration of the violation and the magnitude of harm to the Fund.
Finally, with respect to the third component, we find, as we did in VCI, that a significant upward adjustment of the base forfeiture amount is warranted. However, we increase the upward adjustment calculation to better reflect the gravity of the harm to the Lifeline program in particular, to the Fund in general, and to the consumers who contribute to the Fund. Thus, we propose an upward adjustment equal to three times the reimbursements requested and/or received by Easy Wireless for ineligible subscribers. In adopting this approach to the upward adjustment, we are informed by Section 503(a) of the Act which, in the context of improper intercarrier compensation payments, authorizes a forfeiture of three times the amount of improper compensation. Section 503(a) establishes the principle that, when the harm done by the violation varies based on the amount of the money involved, it is most appropriate to calculate the forfeiture in a manner that reflects the magnitude of the violation. That is the circumstance in this case, and we therefore adjust the forfeiture upward by an amount equal to three times the overcollection requested and/or received.
Based on the facts and record before us, we have determined that Easy Wireless has apparently willfully and repeatedly violated Sections 54.407, 54.409, and 54.410 of the rules. As documented above, in a single month and in connection with the submission of an FCC Form 497, Easy Wireless requested Lifeline support reimbursement of $10,515 for 307 customers who were receiving more than one Easy Wireless Lifeline service. Accordingly, with respect to the first component of the structure articulated above, we propose a base forfeiture of $20,000 for the submission of the FCC Form 497 that includes the 307 ineligible intra-company duplicate subscribers in the line count. With respect to the second component, we propose a base forfeiture of $1,535,000 based on the 307 ineligible subscribers for whom Easy Wireless requested and/or received compensation from the Fund. Finally, with respect to the third component, we propose an upward adjustment of $31,545, which is three times the amount of support Easy Wireless requested and/or received for ineligible consumers. We therefore conclude that a total proposed forfeiture of $1,586,545 against Easy Wireless is warranted.
This forfeiture structure for Lifeline overcollection violations will in no way foreclose the Commission or any other governmental entity from taking additional enforcement action and imposing additional forfeitures for other violations of the Lifeline rules. Moreover, the Commission clarifies that the penalties that result from this forfeiture structure are separate from any amounts that an ETC may be required to refund to USAC in order to make the Fund whole.
ORDERING CLAUSES
Accordingly, IT IS ORDERED that, pursuant to Section 503(b) of the Act, and 1.80 of the rules, Easy Telephone Services d/b/a Easy Wireless is hereby NOTIFIED of this APPARENT LIABILITY FOR A FORFEITURE in the amount of one million, five hundred eighty-six thousand, five hundred forty-five dollars ($1,586,545) for apparently willfully and repeatedly violating Sections 54.407, 54.409, and 54.410 of the rules.
IT IS FURTHER ORDERED that, pursuant to Section 1.80 of the rules, within thirty (30) calendar days of the release date of this Notice of Apparent Liability for Forfeiture and Order, Easy Wireless SHALL PAY the full amount of the proposed forfeiture or SHALL FILE a written statement seeking reduction or cancellation of the proposed forfeiture.
Payment of the forfeiture must be made by check or similar instrument, wire transfer, or credit card, and must include the NAL/Account number and FRN referenced above. Easy Wireless shall also send electronic notification of payment to Theresa Z. Cavanaugh, at Terry.Cavanaugh@fcc.gov and to Pam Slipakoff at Pam.Slipakoff@fcc.gov on the date said payment is made. Regardless of the form of payment, a completed FCC Form 159 (Remittance Advice) must be submitted. When completing the FCC Form 159, enter the Account Number in block number 23A (call sign/other ID) and enter the letters "FORF" in block number 24A (payment type code). Below are additional instructions you should follow based on the form of payment you select:
* Payment by check or money order must be made payable to the order of the Federal Communications Commission. Such payments (along with the completed Form 159) must be mailed to Federal Communications Commission, P.O. Box 979088, St. Louis, MO 63197-9000, or sent via overnight mail to U.S. Bank - Government Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO 63101.
* Payment by wire transfer must be made to ABA Number 021030004, receiving bank TREAS/NYC, and Account Number 27000001. To complete the wire transfer and ensure appropriate crediting of the wired funds, a completed Form 159 must be faxed to U.S. Bank at (314) 418-4232 on the same business day the wire transfer is initiated.
* Payment by credit card must be made by providing the required credit card information on FCC Form 159 and signing and dating the Form 159 to authorize the credit card payment. The completed Form 159 must then be mailed to Federal Communications Commission, P.O. Box 979088, St. Louis, MO 63197-9000, or sent via overnight mail to U.S. Bank - Government Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO 63101.
Any request for making full payment over time under an installment plan should be sent to: Chief Financial Officer -- Financial Operations, Federal Communications Commission, 445 12th Street, S.W., Room 1-A625, Washington, D.C. 20554. If you have questions regarding payment procedures, please contact the Financial Operations Group Help Desk by phone, 1-877-480-3201, or by e-mail, ARINQUIRIES@fcc.gov.
The written statement seeking reduction or cancellation of the proposed forfeiture, if any, must include a detailed factual statement supported by appropriate documentation and affidavits pursuant to Sections 1.16 and 1.80(f)(3) of the rules, and may include any data or information demonstrating that the IDV results referenced in this NAL are materially erroneous or anomalous, or that the forfeiture proposed is otherwise inappropriate. The written statement must be mailed to Theresa Z. Cavanaugh, Chief, Investigations and Hearings Division, Enforcement Bureau, Federal Communications Commission, 445 12[th] Street, SW, Washington, DC 20554, and must include the NAL/Acct. No. referenced in the caption. The written statement shall also be emailed to Theresa Z. Cavanaugh, at Terry. Cavanaugh@fcc.gov and to Pam Slipakoff at Pam.Slipakoff@fcc.gov.
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 principles (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.
IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability for Forfeiture shall be sent by certified mail, return receipt requested, and first class mail to Joseph Fernandez, Chief Executive Officer, Easy Telephone Services d/b/a Easy Wireless, 4352 SE 95th Street, Ocala, FL 34480.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
STATEMENT OF
ACTING CHAIRWOMAN MIGNON L. CLYBURN
RE: Easy Telephone Services d/b/a Easy Wireless; Assist Wireless, LLC; Icon Telecom, Inc.;
TracFone Wireless, Inc.; and UTPhone, Inc.
The Lifeline program provides critical communications services to those who are least likely to be able to secure these services for themselves. It affords the less fortunate an ability to contact family, employers, prospective employers and - most critically - emergency services, by the same rapid and reliable means that are routinely available to the rest of us. Protecting this vital program from fraud, waste and abuse is a central component of our efforts to ensure the program's viability, and it is with this in mind that we propose the very substantial penalties in these cases.
Collecting support for duplicate Lifeline service - the practice we address in these cases - is not only illegal, it diverts resources from legitimate users of the program and is unquestionably within the power and duty of Lifeline providers to prevent. It must stop. And, the more than $14 million in forfeitures we propose here is meant to achieve that end.
Our goal is to be tough, but fair. The fines in these cases are purposely large. However, I want to ensure adequate deterrence without harming the legitimate service these providers bring to their subscribers. Accordingly, I have instructed the Enforcement Bureau to carefully consider the companies' responses to these NALs. Ultimately, our objective is to eliminate fraud, waste and abuse, while preserving and promoting the availability of communications services to those in need. I will do all I can to ensure that we achieve this balanced result.
STATEMENT OF
COMMISSIONER AJIT PAI
RE: Easy Telephone Services d/b/a Easy Wireless; Assist Wireless, LLC; Icon Telecom, Inc.;
TracFone Wireless, Inc.; and UTPhone, Inc.
Today, the FCC makes it clear that we are serious about combatting the rampant waste, fraud, and abuse plaguing the Lifeline program. By proposing forfeitures totaling more than $14 million against five providers for apparent Lifeline fraud, we begin the process of regaining the public's trust and showing that we do not take responsible stewardship of public funds lightly.
From 2008 through 2012, the annual disbursements of the low-income component of the Universal Service Fund grew from $817 million to $2.2 billion. Some of that growth may have been organic, but we know that a significant amount was due to increased waste, fraud, and abuse within the program. That's why the Commission adopted some reforms in early 2012 to prohibit such abuse. And that's why today's action, enforcing those reforms, is so important.
The substantial abuses of the Lifeline program deserve a significant response. The instant NALs meet that standard. I am especially pleased that my colleagues agreed to my request to increase fiftyfold the proposed forfeitures against Easy Wireless, Icon Telecom, Assist Wireless, UTPhone, and TracFone Wireless. A slap on the wrist is not sufficient when the same company seeks Lifeline support more than once in the same month for the same person.
Unfortunately, these intracompany duplicates are just the tip of the iceberg. We know that the Universal Service Administrative Company has already found tens of thousands of duplicate subscribers in the Lifeline system -- and that's just subscribers brazen enough to get Lifeline service from the same company more than once. Many more have gotten Lifeline benefits from multiple companies. Back in
April, for example, the Commission issued notices to 37 Easy Wireless subscribers, each of whom had at least five Lifeline accounts in his or her name. The American people won't stand for that kind of waste, fraud, and abuse, and neither will I.