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Federal Communications Commission
Washington, D.C. 20554
In the Matter of
File No.: EB-IHD-13-00010656
NAL/Acct. No.: 201432080003
NOTICE OF APPARENT LIABILITY FOR FORFEITURE
Adopted: November 1, 2013 Released: November 1, 2013
By the Commission:
In this Notice of Apparent Liability for Forfeiture (NAL), we continue our commitment to combatting waste, fraud, and abuse in the Lifeline program (Lifeline) by taking action and proposing monetary forfeitures against a company that apparently has ignored our rules and exploited a program dedicated to providing low-income Americans with basic telephone service. Specifically, we find that i-wireless, LLC (i-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 ineligible subscriber lines between the months of October 2012 and April 2013. Based on our review of the facts and circumstances surrounding these apparent violations, we propose a monetary forfeiture in the amount of eight million, seven hundred and fifty-three thousand and seventy-four dollars ($8,753,074).
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 be receiving 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 under 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 are 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.
i-wireless, LLC. i-wireless, a North Carolina limited liability company headquartered in Newport, Kentucky, is equally owned by two members, Genie Global, Inc. and The Kroger Co., which is a large grocery retail chain. i-wireless has been designated an ETC and offers Lifeline service in a number of jurisdictions including, but not limited to, Illinois, Indiana, New York, North Carolina, Ohio, South Carolina, Tennessee, and West Virginia.
USAC conducted IDVs of the Lifeline support requested by i-wireless for its subscribers in the following eight states for the months specified: Ohio (October 2012); North Carolina (November 2012); Illinois (November 2012, December 2012, and January 2013 through April 2013); Tennessee (December 2012); West Virginia (December 2012); New York (January 2013); Indiana (February 2013); and South Carolina (February 2013). Based on USAC's analysis, i-wireless apparently had 1,684 individual intra-company duplicate lines for which i-wireless improperly sought Lifeline support reimbursement. According to USAC, i-wireless requested $24,358 in overpayments from USAC over the months covered by the IDVs.
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 i-wireless apparently willfully and repeatedly violated Sections 54.407, 54.409, and 54.410 of the rules by concurrently requesting Lifeline support reimbursement for 1,684 individual intra-company duplicate lines. Based on the facts and circumstances before us, we therefore conclude that i-wireless is apparently liable for forfeiture penalties totaling $8,753,074.
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.
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.
To eliminate waste, fraud, and abuse, maintain the integrity of the Fund, and protect the consumers who contribute to the Fund, the Commission has implemented a three-part forfeiture framework for Lifeline overcollection violations that imposes: (1) a 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; (2) 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; and (3) an upward adjustment of the base forfeiture equal to three times the reimbursements requested and/or received by the ETC for ineligible subscribers.
Based on the facts and record before us, we have determined that i-wireless has apparently willfully and repeatedly violated Sections 54.407, 54.409, and 54.410 of the rules. As documented above, over the course of seven months, and in connection with the submission of thirteen FCC Form 497s, i-wireless requested Lifeline support reimbursement of $24,358 for customers who were receiving more than one i-wireless Lifeline service. Accordingly, with respect to the first component of the structure articulated by the Commission, we propose a base forfeiture of $260,000 for the submission of the FCC Form 497s that included the ineligible intra-company duplicate subscribers in the line counts. With respect to the second component, we propose a base forfeiture of $8,420,000 based on the 1,684 individual intra-company duplicate lines for which i-wireless requested and/or received compensation from the Fund. Finally, with respect to the third component, we propose an upward adjustment of $73,074, which is three times the amount of support i-wireless requested and/or received for ineligible consumers. We therefore conclude that a total proposed forfeiture of $8,753,074 against i-wireless for its apparent violations of the Commission's Lifeline rules is warranted.
This NAL 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 NAL are separate from any amounts that an ETC may be required to refund to USAC in order to make the Fund whole.
Accordingly, IT IS ORDERED that, pursuant to Section 503(b) of the Act, and 1.80 of the rules, i-wireless, LLC, is hereby NOTIFIED of this APPARENT LIABILITY FOR A FORFEITURE in the amount of eight million, seven hundred and fifty-three thousand and seventy-four dollars ($8,753,074) 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, i-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. i-wireless shall also send electronic notification of payment to Theresa Z. Cavanaugh, at Terry.Cavanaugh@fcc.gov [HYPERLINK: mailto: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, S.W., Washington, D.C. 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 Lance J.M. Steinhart, Esq., Lance J.M. Steinhart, P.C., 1725 Windward Concourse, Suite 150, Alpharetta, GA 30005.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch