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.
*****************************************************************
Federal Communications Commission FCC 16-158
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Network Services Solutions, LLC,
Scott Madison
)
)
)
)
)
)
File No.: EB-IHD-15-0001913
NAL/Acct. No.: 201732080001
FRN: 0014290357
NOTICE OF APPARENT LIABILITY FOR FORFEITURE AND ORDER
Adopted: November 4, 2016 Released: November 4, 2016
By the Commission: Commissioners Pai and O’Rielly Approving in Part, Dissenting in Part and
Commissioner Pai issuing a statement.
TABLE OF CONTENTS
Heading Paragraph #
I. INTRODUCTION .................................................................................................................................. 1
II. BACKGROUND .................................................................................................................................... 4
A. Legal Framework ............................................................................................................................. 4
B. Relevant Entities and Individuals .................................................................................................. 16
1. Network Services Solutions, LLC ........................................................................................... 16
2. AT&T ...................................................................................................................................... 21
3. Regional Sales Companies ...................................................................................................... 23
4. Health Care Providers ............................................................................................................. 24
III. THE COMMISSION’S INVESTIGATION ........................................................................................ 25
A. NSS’s Conduct Related to the Rural Health Care Program’s Competitive Bidding Process ........ 26
1. NSS Received Commitments from HCPs Prior to the Completion of the 28-Day
Competitive Bidding Process .................................................................................................. 27
2. NSS and HCPs Created and Used Post Facto Bid Matrices ................................................... 35
3. NSS Furnished a Gift to Receive a Contract ........................................................................... 46
4. NSS’s Use of Confidential and/or Proprietary Information from AT&T and Others to
Gain Competitive Advantage in the Bidding Process ............................................................. 50
B. NSS Inflated the Rural Rates Charged to HCPs ............................................................................ 54
C. NSS’s Use of Apparently Forged and False Documents Related to the Rural Health Care
Program and Universal Service Fund ............................................................................................ 70
1. NSS’s Use of Apparently Forged Urban Rates That Were Submitted to USAC and
Supported USF Payments ........................................................................................................ 72
2. NSS’s Urban Rate Letters on Their Own Letterhead Falsely State Certain Services
Cost $138.00 Per Month .......................................................................................................... 84
IV. DISCUSSION ...................................................................................................................................... 88
A. NSS Apparently Engaged in Competitive Bidding Practiced That Were Not Fair and
Open in Order to Receive Contracts from HCPs in Violation of Rural Health Care
Program Rules ................................................................................................................................ 89
Federal Communications Commission FCC 16-158
2
1. NSS Apparently Received Commitments from HCPs to Provide Telecommunications
Services Prior to the Expiration of the 28-Day Period and, in Some Instances, Before
the Form 465 Was Even Posted, in Violation of Section 54.603 of the Commission’s
Rules ........................................................................................................................................ 91
2. NSS Created Post Facto Bid Matrices to Apparently Deceive USAC and the
Commission into Believing that Competitive Bidding Processes were Fair and Open,
in Violation of Sections 54.603 and 54.615 of the Commission’s Rules ................................ 94
3. NSS Apparently Induced an HCP to Award It a Contract as a Result of an Improper
Gift, in Violation of Sections 54.603 and 54.615 of the Commission’s Rules........................ 97
4. NSS Apparently Received Confidential, Proprietary, and Inside Information from
Service Providers and HCPs that Gave NSS an Unfair Advantage in the Competitive
Bidding Process, in Violation of Sections 54.603 and 54.615 of the Commission’s
Rules ........................................................................................................................................ 99
B. NSS Apparently Violated the Commission’s Rules by Inflating Rural Rates Charged to
HCPs to Improperly Increase Its Payments from the Fund, in Violation of Sections
54.607 and 54.609 of the Commission’s Rules ........................................................................... 101
C. NSS Apparently Violated the Commission’s Rules Through Its Use of Apparently Forged
and False Documents to Improperly Increase Payments Received from the Fund ...................... 105
1. NSS Apparently Violated the Commission’s Rules Through Its Use of Apparently
Forged Urban Rate Documents, in Violation of Sections 54.605, 64.609, and 54.613
of the Commission’s Rules .................................................................................................... 108
2. NSS Apparently Violated the Commission’s Rules When It Falsely Represented that
the Urban Rate for Certain Services Was $138.00 Per Month, in Violation of Sections
54.605, 64.609, and 54.613 of the Commission’s Rules ....................................................... 109
D. NSS Apparently Committed Wire Fraud ..................................................................................... 110
E. Joint and Several Liability of NSS and Scott Madison ................................................................ 117
V. PROPOSED FORFEITURE .............................................................................................................. 127
A. Proposed Forfeiture Amount for NSS’s Conduct in Apparent Violation of the
Commission’s Competitive Bidding Rules .................................................................................. 133
B. Proposed Forfeiture Amount for NSS’s Apparent Violations of the Commission’s Rules
Governing Urban Rates ................................................................................................................ 136
C. Proposed Forfeiture Amount for NSS’s Apparent Violation of the Wire Fraud Statute
Pursuant to Section 503(b)(1)(D) ................................................................................................. 141
VI. CONCLUSION .................................................................................................................................. 142
VII. ORDERING CLAUSES .................................................................................................................... 148
APPENDIX A – Overview of $138.00 Urban Rates as Represented by NSS
APPENDIX B – Form 466s Charged
APPENDIX C – Form 466s Supported by Apparently False $138.00 Rate Documents
APPENDIX D – Form 466s Supported by Apparently Forged Comcast Rate Documents
APPENDIX E – Apparently Forged Urban Rate Document Submitted to USAC by HCP South Sunflower
on June 10, 2013
APPENDIX F – Apparently Forged Urban Rate Document Backdated by NSS and Submitted to USAC
by HCP South Sunflower on January 24, 2014
APPENDIX G – Email from NSS Employee to Scott Madison Attaching Apparently Backdated and
Forged Urban Rate Documents at His Request
I. INTRODUCTION
1. The federal Rural Health Care Program (RHC Program) ensures that eligible rural health
care providers (HCPs) pay the same amount for telecommunications services as their urban counterparts.
Through this program, the Commission facilitates the availability of cutting edge medical services to rural
communities, including high-speed telecommunications and internet connectivity. Parties that defraud or
Federal Communications Commission FCC 16-158
3
otherwise harm the RHC Program not only deprive the program of much-needed funds, but also
potentially harm millions of rural Americans, who may end up paying more for medically necessary
services or forgoing them altogether. This is such a case.
2. From at least 2012 through the present, Network Services Solutions, LLC (NSS), in
connection with its participation in the RHC Program, received millions of dollars from the Universal
Service Fund (USF or the Fund) to which it was not apparently entitled. NSS’s apparently wrongful
conduct includes:
Competitive Bidding
? Prematurely reaching agreements in principle with eligible rural HCPs prior to the end of the
mandatory 28-day waiting period during which HCPs are required to consider bids submitted
by multiple parties;
? Deceiving the Universal Service Administrative Company (USAC) and the Commission by
proffering bid analysis documents that gave the false impression that NSS’s selection as service
provider for certain contracts was objectively made;
? Providing a $10,000 gift to induce an HCP to award a contract to NSS;
? Gaining an unfair advantage in the competitive bidding process by utilizing proprietary
information it improperly obtained through its relationship with an account manager of a
facilities-based telecommunications provider;
Inflated Rural Rates
? Contributing little to no value for services that were provided to HCPs by underlying facilities-
based carriers and then significantly inflating the actual costs of those services, the rural rates,
which were ultimately paid by the Fund;
Forged and False Documents
? Submitting documents to USAC and HCPs with apparently forged and false urban rates in
order to increase NSS’s payments from the Fund; and
Wire Fraud
? Transmitting forged documents via interstate wire to HCPs and USAC in order to support USF
claims, which resulted in NSS improperly receiving considerably greater payments from the
Fund.
3. In this Notice of Apparent Liability for Forfeiture (NAL), we continue our commitment
to combat waste, fraud, and abuse in the RHC Program by taking action and proposing monetary
forfeitures against a company that has apparently ignored the Commission’s Rules. Specifically, we find
that NSS apparently willfully and repeatedly violated Sections 54.603, 54.605, 54.607, 54.609, 54.613
and 54.615 of the Commission’s Rules,1 by engaging in conduct which resulted in competitive bidding
that was not fair and open, inflating the rates for services it charged to HCPs and the Fund, and relying on
apparently forged and false documents to support its claims for payment from the Fund. Pursuant to
Section 503(b)(1)(D) of the Communications Act of 1934, as amended (Act)2, we further find that NSS
apparently violated the wire fraud statute by transmitting or causing to be transmitted by means of wire,
radio, or television communication in interstate commerce apparently forged documents to support its
claims for payment from the Fund. 3 As a result, and upon the findings and recommendations of the
1 47 CFR §§ 54.603, 54.605, 54.607, 54.609, 54.613, 54.615.
2 47 U.S.C. § 503(b)(1)(D).
3 18 U.S.C. § 1343.
Federal Communications Commission FCC 16-158
4
Enforcement Bureau’s (Bureau) USF Strike Force (Strike Force) after an extensive and comprehensive
investigation (the Investigation),4 we propose a forfeiture penalty of $21,691,498.85. The forfeiture
penalty we propose here reflects the seriousness, duration, egregiousness, and scope of NSS’s multiple
apparent violations.
II. BACKGROUND
A. Legal Framework
4. Before discussing NSS’s apparent violations, we first must provide some background
information on the RHC Program. As noted above, the RHC Program provides financial support to
eligible rural HCPs so that all health care facilities—regardless of whether they are located in a rural or
urban area—can implement the modern telecommunications systems that are vital to 21st century medical
care.5 The Telecommunications Program is part of the Commission’s RHC Program and is paid for
through the USF.6 Through the Telecommunications Program, eligible rural HCPs can obtain rates for
supported services that are no higher than the highest tariffed or publicly-available commercial rate for a
similar service in the closest city in the state with a population of 50,000 or more people.7 Support
payments from the Fund related to the Telecommunications Program are calculated as the difference
between the rural rate (the rate for telecommunication services provided to HCPs in rural areas, which is
generally more expensive) and the lower urban rate (the rate for commercial customers other than HCPs
in nearby urban areas, which is generally less expensive).8
5. Competitive Bidding. Through the RHC Program, HCPs may apply for USF support for
eligible services only by making a “bona fide” request for services from telecommunications companies,
seeking competitive bids for services eligible for support, and following any other applicable state, local,
or other procurement requirements.9 The competitive bidding requirement is a significant safeguard to
4 In addition to the analysis of NSS data and documents, USAC data and documents, and other investigative steps,
several confidential witnesses, including former NSS employees and employees of regional sales companies, were
interviewed in connection with this Investigation.
5 See Federal-State Joint Board on Universal Service, Report and Order, 12 FCC Rcd 8776, 8796, para. 35 (1997);
see also 47 CFR § 54.602.
6 The RHC Program also includes the Healthcare Connect Fund, Internet Access Program and the Pilot Program.
The Healthcare Connect Fund provides a 65 percent discount on eligible expenses related to broadband connectivity
to both HCPs and consortia. The Internet Access Program provides a 25 percent discount off the cost of monthly
Internet access for eligible rural HCPs. The Pilot Program provides funding for up to 85 percent of eligible costs of
the construction or implementation of statewide and/or regional broadband networks. See generally Rural Health
Care Support Mechanism, Report and Order, 27 FCC Rcd 16678 (2012); Rural Health Care Support Mechanism,
Report and Order, Order on Reconsideration, and Further Notice of Proposed Rulemaking, 18 FCC Rcd 24546
(2003) (2003 Order and Further Notice). Funding for Internet access under the Internet Access Program continued
through the end of funding year 2013, which ended on June 30, 2014. See Rural Health Care Support Mechanism,
Report and Order, 27 FCC Rcd 16678, 16700, n.120 (2012). Beginning in January 2014, rural HCPs receiving
support for Internet access received support for those same services through the Healthcare Connect Fund Program.
See Rural Health Care Support Mechanism, Report and Order, 27 FCC Rcd 16678, 16819, para. 354 (2012).
7 47 CFR § 54.607.
8 47 CFR §§ 54.602, 54.609. See generally Rural Health Care Support Mechanism, Report and Order, Order on
Reconsideration, and Further Notice of Proposed Rulemaking, 18 FCC Rcd. 24546 (2003) (2003 Order and Further
Notice).
9 47 CFR §§ 54.602, 54.603, 54.615.
Federal Communications Commission FCC 16-158
5
protect the RHC Program and USF from waste, fraud, and abuse, and ensures that HCPs choose the most
cost-effective bid so that the USF is used wisely and efficiently.10
6. To make the required bona fide request for bids in connection with the
Telecommunications Program, HCPs prepare and transmit to USAC an FCC Form 465 (Form 465),
which USAC then posts on its website for telecommunications carriers to review.11 An HCP submits one
Form 465 per Funding Year (FY) for all services for which it is seeking bids through the
Telecommunications Program. Each funding year begins on July 1 and ends June 30; for example,
FY2012 runs from July 1, 2012, through June 30, 2013, and FY2013 begins on July 1, 2013.
7. Through the Form 465, HCPs describe the planned service requirements and may provide
other information about their service needs to potential service providers.12 In response to the Form 465,
interested service providers submit bids to the HCPs. HCPs must review all bids submitted in response to
the Form 465 and wait at least 28 days before “making commitments” with the selected service
provider.13 The earliest date on which HCPs can enter into agreements with the selected service provider,
i.e., the 29th day after the Form 465 is posted, is the Allowable Contract Selection Date (ACSD).
8. Under the Commission’s Rules, HCPs must choose the most cost-effective service
provider, which is the “method that costs the least after consideration of the features, quality of
transmission, reliability, and other factors that the health care provider deems relevant to choosing a
method of providing the required health care services.”14 Once the HCP selects the most cost-effective
service provider and enters into a service contract, the HCP conveys this selection to USAC by filing an
FCC Form 466 (Form 466), which also serves as the HCP’s request for support payments from the USF.15
The applicant uses the Form 466 to verify the type of services ordered and to certify that the selected
service provider is the most cost-effective option.16
9. Requesting Support. USAC uses the Form 466, along with the supporting documentation
and information that applicants submit, to determine, among other things, the appropriate support
payments from the Fund.17 Supporting documentation and information includes the rural and urban rates
to determine the cost of service, the requested USF support amount, a copy of the signed contract (if
applicable), and copies of bids (if more than one bid is received).18 The Form 466 and supporting
10 See In the Matter of Rural Health Care Support Mechanism, Order, 22 FCC Rcd. 20360, 20412, para. 101 (2007).
See also Federal-State Joint Board on Universal Service, Report and Order, 12 FCC Rcd. 8776, 9076, paras. 480,
686 (1997) (requiring competitive bidding processes for eligible schools and libraries and eligible health care
providers to be fair and open such that no bidders receive an unfair advantage).
11 47 CFR § 54.603; Health Care Providers Universal Service, Description of Services Requested and Certification
Form, OMB 3060-0804 (Nov. 2011) (Form 465); Form 465 Instructions, Rural Health Care Universal Service
Mechanism, OMB-3060-0804 (Nov. 2011).
12 See Form 465, Block 5; USAC, Rural Health Care, Telecommunications Program, Step 2: Evaluation Criteria &
Service Requests, http://www.usac.org/rhc/telecommunications/health-care-providers/step02/default.aspx (last
visited Oct. 31, 2016).
13 47 CFR § 54.603(b)(3).
14 47 CFR § 54.603(b)(4).
15 See Health Care Providers Universal Service, Funding Request and Certification Form, OMB 3060-0804 (Nov.
2011) (Form 466); Form 466 Instructions, Rural Health Care Universal Service Mechanism, OMB-3060-0804 (Nov.
2011) (Form 466 Instructions).
16 See 47 CFR § 54.603(b)(4); see also Form 466.
17 See Form 466; USAC, Rural Health Care, Telecommunications Program, Health Care Providers, Step 4: Submit
Funding Requests, http://www.usac.org/rhc/telecommunications/health-care-providers/step04/default.aspx (last
visited Oct. 31, 2016).
18 See Form 466; USAC, Rural Health Care, Telecommunications Program, Health Care Providers, Documentation,
(continued….)
Federal Communications Commission FCC 16-158
6
documentation, including the urban rate documentation, is typically submitted electronically through
USAC’s “My Portal” web-based application.19 HCPs must submit one Form 466 for each service for
which they are seeking support from the Fund.20
10. Determining the Urban and Rural Rates. The rural rate submitted by the HCP, which
reflects the HCP’s actual cost of service, is substantiated by a monthly bill or invoice from the service
provider with the type of service and the actual cost of the service for which funding is requested.21 HCPs
and service providers can obtain and utilize urban rates from a number of sources. One source is USAC’s
website, which contains a list of acceptable urban rates.22 If an HCP uses an urban rate other than one
posted on USAC’s website, an HCP must provide documentation of the urban rate, which may come from
the service provider.23 The urban rate must be in use in an urban area in the HCP’s state.24 Urban rate
documentation may include tariff pages, contracts, signed letters on a service provider’s letterhead, rate
pricing information from a service provider’s website, or similar documentation showing how the urban
rate was obtained,25 and the date on the urban rate documentation should indicate that the rate is provided
in the current funding year.26
11. Evergreen Status. USAC then reviews each contract to determine whether it is eligible
for “evergreen” status, which refers to a contract that covers more than one funding year. If USAC
approves the contract for evergreen status, the HCP would be exempt from having to post subsequent
Form 465s and engage in further competitive bidding for the remainder of the contract term.27 However,
regardless of whether the HCP receives evergreen status, it is required to apply for support annually by
filing a Form 466.28
12. Funding. USAC reviews the applicant’s Form 466 with accompanying documentation
and information, the service contract entered into between the HCP and service provider, and any
(Continued from previous page)
http://www.usac.org/rhc/telecommunications/health-care-providers/documentation.aspx (last visited Oct. 31, 2016).
19 See USAC, Rural Health Care, Telecommunications Program, My Portal, http://usac.org/rhc/tools/applicant-
login/default.aspx (last visited Oct. 31, 2016). USAC’s network servers for the Rural Health Care Program’s My
Portal are currently located in Virginia.
20 See Form 466 Instructions.
21 See Form 466; USAC, Rural Health Care, Telecommunications Program, Documentation,
http://www.usac.org/rhc/telecommunications/health-care-providers/documentation.aspx (last visited Oct. 31, 2016).
22 See USAC, Rural Health Care, Telecommunications Program, Search Tools, Urban Rates Search,
www.usac.org/rhc/telecommunications/tools/UrbanRates/search.asp (last visited Oct. 31, 2016).
23 See Form 466 Instructions, Block 6; USAC, Rural Health Care, Telecommunications Program, Health Care
Providers, Documentation, http://www.usac.org/rhc/telecommunications/health-care-providers/documentation.aspx
(last visited Oct. 31, 2016).
24 See 47 CFR § 54.605; see also Form 466 Instructions, Block 6; USAC, Rural Health Care, Telecommunications
Program, Health Care Providers, Supporting Documentation, http://www.usac.org/rhc/telecommunications/health-
care-providers/documentation.aspx (last visited Oct. 31, 2016).
25 See Form 466; USAC, Rural Health Care, Telecommunications Program, Health Care Providers, Documentation,
http://www.usac.org/rhc/telecommunications/health-care-providers/documentation.aspx (last visited Oct. 31, 2016).
26 See USAC, Rural Health Care, Telecommunications Program, Health Care Providers, Frequently Asked
Questions, Q9: What is acceptable documentation, guidelines for calculating urban rates,
http://www.usac.org/rhc/telecommunications/faqs/default.aspx (last visited Oct. 31, 2016).
27 See USAC, Rural Health Care, Telecommunications Program, Health Care Providers, Evergreen Contracts,
http://www.usac.org/rhc/telecommunications/health-care-providers/evergreen-contracts.aspx (last visited Oct. 31,
2016).
28 Id.
Federal Communications Commission FCC 16-158
7
competing bids. USAC then issues funding commitment letters (FCLs) informing the HCP whether the
application has been approved or denied. 29 USAC may also request additional information before
finalizing a decision.
13. When USAC approves the HCP’s Form 466 and related materials, an HCP submits an
FCC Form 467 (Form 467) to notify USAC that the service provider has begun providing the supported
service.30 An HCP must submit one Form 467 for each Form 466 that the HCP previously submitted to
USAC.31 The Form 467 is also used to notify USAC when the applicant has discontinued the service or if
the service was or will not be active during the Funding Year.32
14. Service Provider Invoicing. If USAC approves the Form 467, the HCP and the service
provider will then receive a copy of the HCP Support Schedule (HSS), which outlines the approved
support amounts for each billing cycle.33 The service provider should then begin crediting the HCP for
the support amount (if it has not yet done so) and may begin to invoice USAC for the telecommunications
services approved by USAC.34
15. The service provider then submits its invoice to USAC through the My Portal application
and electronically certifies that the information contained in the invoice is correct and that the HCP was
credited with the amount shown under “Support Amount to be Paid by USAC.”35 USAC reviews the
invoice, and if approved, disburses funds to the service provider in accordance with the HSS.36
B. Relevant Entities and Individuals
1. Network Services Solutions, LLC
16. Network Services Solutions, LLC (NSS) is a limited liability company, organized under the
laws of Nevada, and is a reseller of telecommunications services.37 NSS provides telecommunications
services to HCPs in connection with the RHC Program. NSS has received more than $38,000,000 in
payments from the USF from 2006 through the present in connection with the RHC Program, and is one of
the largest recipients of USF funding in the RHC Program.38
29 If USAC denies support or if the HCP or service provider disagrees with the support amount as determined by
USAC, either the HCP and/or the service provider may file an appeal of USAC’s determination. See USAC, Rural
Health Care, Telecommunications Program, Health Care Providers, Step 4: Submit Funding Requests,
http://www.usac.org/rhc/telecommunications/health-care-providers/step04/default.aspx (last visited Oct. 31, 2016).
30 See Health Care Providers Universal Service, Connection Certification, OMB 3060-0804 (Nov. 2011) (Form
467); Form 467 Instructions, Rural Health Care Universal Service Mechanism, OMB-3060-0804 (Nov. 2011).
31 See id.
32 See id.
33 USAC, Rural Health Care, Telecommunications Program, Service Providers, Step 5: Support Schedule,
http://www.usac.org/rhc/telecommunications/service-providers/step05/default.aspx (last visited Oct. 31, 2016).
34 USAC, Rural Health Care, Telecommunications Program, Service Providers, Invoicing,
http://www.usac.org/rhc/telecommunications/service-providers/invoicing.aspx (last visited Oct. 31, 2016).
35 See id.
36 USAC, Rural Health Care, Telecommunications Program, Service Providers, Step 6: Invoice USAC,
http://www.usac.org/rhc/telecommunications/service-providers/step06/default.aspx (last visited Oct. 31, 2016).
37 NSS Articles of Organization, Limited Liability Company (Dec. 30, 2004); see also Telecommunications
Reporting Worksheet, FCC Form 499-A, OMB 3060-0055, Block 1 (Dec. 2014) NS 0003843.
38 Information on file in EB-IHD-15-0001913.
Federal Communications Commission FCC 16-158
9
4. Health Care Providers
24. A number of HCPs contracted for services from NSS through the RHC Program and are
referenced throughout the NAL:
a. Weems Community Mental Health Center (Weems), which has health care facilities in
each of the nine counties that make up Region Ten of the Mississippi Community
Mental Health System;44
b. Bond County Health Department (Bond) is located in Greenville, Illinois;45
c. South Sunflower County Hospital (South Sunflower) is located in Indianola,
Mississippi;46
d. Forrest General Hospital/Marion General Hospital (FGH/MGH) is part of the Forrest
Health System, which is a partnership of healthcare organizations formed to increase
access to health care in south Mississippi;47
e. Hardy Wilson Memorial Hospital (Hardy Wilson) is located in Hazlehurst,
Mississippi;
f. Tallahatchie General Hospital (Tallahatchie) is a hospital located in Charleston,
Mississippi;48
g. East Central Mississippi Health Care (East Central) operates health centers and clinics
in Mississippi;49
h. Texoma Community Center (Texoma), located in the Texas counties of Cooke,
Fannin, and Grayson, provides an array of mental health services for adults,
adolescents, and children;50 and
i. South Central Regional Medical Center (SCRMC) is a hospital system located in
Mississippi.51
III. THE COMMISSION’S INVESTIGATION
25. In connection with the Investigation, confidential witnesses were interviewed, including
former NSS employees, as well as principals and employees of the Regional Sales Companies.
Collectively, these witnesses discussed NSS, its conduct, and how its agents engaged in practices that
resulted in competitive bidding that was not fair and open, and gave NSS an improper advantage in the
RHC Program marketplace. These witnesses also discussed misconduct related to the urban and rural
rates NSS submitted to HCPs and ultimately to USAC, which resulted in improper USF payments to
NSS. These witnesses furnished the Commission with over one hundred thousand documents that
44 Weems Community Mental Health Center, http://www.weemsmh.com/default/index.cfm/about-us/ (last visited on
Oct. 31, 2016).
45 Bond County Health Department, http://www.bchd.us/pcc.htm (last visited on Oct. 31, 2016).
46 South Sunflower County Hospital, http://health.usnews.com/best-hospitals/area/ms/south-sunflower-county-
hospital-6540355 (last visited on Oct. 31, 2016).
47 Forrest General Hospital/Marion General Hospital, http://www.forresthealth.org/our-locations/marion-general-
hospital/ (last visited on Oct. 31, 2016).
48 Tallahatchie General Hospital, http://www mytgh.com/about (last visited on Oct. 31, 2016).
49 East Central Mississippi Health Care, https://www.ecmhci.com/history (last visited on Oct. 31, 2016).
50 Texoma Community Center, http://www.texomacc.org/ (last visited on Oct. 31, 2016).
51 South Central Regional Medical Center, http://www.scrmc.com (last visited on Oct. 31, 2016).
Federal Communications Commission FCC 16-158
10
corroborated their statements and independently demonstrated NSS’s apparent misconduct in violation of
the Commission’s Rules governing the RHC Program.
A. NSS’s Conduct Related to the Rural Health Care Program’s Competitive Bidding
Process
26. The Commission has consistently required that the competitive bidding process be fair
and open, and that no bidders receive an improper advantage.52 In furtherance of these requirements, the
Commission’s competitive bidding rules for the Healthcare Connect Fund53 Program prohibit service
providers from, among other things, preparing, signing, or submitting an applicant’s initial documents
requesting services, being involved in setting bid evaluation criteria, or participating in the bid evaluation
or vendor selection process.54 In apparent violation of the Commission’s Rules and Orders requiring that
the competitive bidding process be fair and open, NSS obtained contracts supported by the RHC Program
through a variety of apparently unlawful means, including receiving inside, proprietary information;
agreeing in principle with HCPs to receive RHC Program contracts before the Form 465 was posted;
furnishing a gift to an HCP to induce a contract award and extension of that contract; and creating
documents for certain HCPs to submit to USAC and the Commission in order to give the impression that
the HCPs undertook an objective, contemporaneous assessment of competing bidders when, in fact, the
HCPs had not performed any such assessment prior to awarding the contract to NSS.
1. NSS Received Commitments from HCPs Prior to the Completion of the 28-
Day Competitive Bidding Process
27. The Commission’s Rules prohibit HCPs from making commitments with service
providers until a minimum of 28 days after the posting of a Form 465.55 The Investigation demonstrated
that NSS and certain HCPs entered into service agreements during the 28-day waiting period, or
otherwise committed to procuring services from NSS as part of the RHC Program. In some cases, these
commitments were made before a Form 465 solicitation for bids was posted. In all of these instances,
NSS requested payments from the Fund.
28. One such example involved HCP Bond. On June 25, 2013, Bond filed, and USAC
posted, a Form 465 soliciting bids for “Internet Service ONLY.”56 Prior to the ACSD, NSS determined
that Bond’s Form 465 was too specific and would likely not support funding for NSS’s proposed services
52 See Rural Health Care Support Mechanism, Report and Order, 27 FCC Rcd 16678, 16778, paras. 229-30 (2012)
(“[C]ompetitive bidding furthers the competitive neutrality requirement . . . of the Act by ensuring that universal
service support does not disadvantage one provider over another . . . [A]ll entities participating in the [RHC
Program] must conduct a fair and open competitive bidding process prior to submitting a request for funding . . .”);
cf. 47 CFR § 54.503(a) (“All entities . . . must conduct a fair and open competitive bidding process . . . .”); Federal-
State Joint Board on Universal Service First Report and Order, Report and Order, 12 FCC Rcd 8776, 9133-34,
paras. 686, 688 (1997); Schools and Libraries Universal Service Support Mechanism, Third Report and Order and
Second Further Notice of Proposed Rulemaking, 18 FCC Rcd 26912, 26939, para. 66 (2003) (Schools and Libraries
Third Report and Order) (stating that a fair and open competitive bidding process is critical to preventing waste,
fraud, and abuse of program resources).
53 See supra note 6.
54 See 47 CFR § 54.642; Rural Health Care Support Mechanism, Report and Order, 27 FCC Rcd at 16779, para.
231. The E-rate Program’s competitive bidding rules also prohibit such conduct. See 47 C.F.R. § 54.503; In the
Matter of Schools and Libraries Universal Support Mechanism, A National Broadband Plan For Our Future, Sixth
Report and Order, 25 FCC Rcd 18762, 18798-800, paras. 85-86 (2010) (Schools and Libraries Sixth Report and
Order).
55 47 CFR § 54.603(b)(3).
56 FY2013, Form 465, HCP No. 13498, Form 465 Application No. 43136622, Boxes 29 and 30 (June 25, 2013). The
ACSD was July 23, 2013, and NSS submitted a bid on July 10, 2013. See Email from , Director of
Business Development, NSS, to Kris Hand, Administrative Assistant, Bond (July 10, 2013, 2:01 p.m.).
Federal Communications Commission FCC 16-158
13
33. Tallahatchie’s Form 465 for FY2013 was posted on May 28, 2013, and resulted in an
ACSD of June 25, 2013.75 Even before the competitive bidding process had begun, NSS, through
Madison, had already placed the order for Tallahatchie’s service with AT&T on May 8, 2013.76
Tallahatchie claimed on its FY2013 Form 466 that it selected NSS as its service provider on July 19,
2013.77
34. During the 28-day competitive bidding period, Tallahatchie received other bids in
addition to the one submitted by NSS.78 In reviewing the Form 466 and its supporting documentation,
USAC asked Tallahatchie to justify its selection of NSS’s $8,100.00 bid when a losing bidder had offered
substantially similar services at a cost of $1,876.00.79 In its response, Tallahatchie advised USAC that
based on its evaluation of the contracts, NSS was “worth the high cost.”80 On July 24, 2014, USAC
denied Tallahatchie’s request for support finding that it had not selected the most cost effective method of
providing the requested service.81 Tallahatchie and NSS did not appeal this denial of support, and NSS
did not require Tallahatchie to pay the outstanding invoiced amounts.82 Although USAC denied funding
support for Tallahatchie, NSS’s conduct illustrates the schemes the company apparently devised to defeat
the Commission’s competitive bidding rules.
2. NSS and HCPs Created and Used Post Facto Bid Matrices
35. A bid matrix is one method HCPs may use to demonstrate to USAC how they evaluated
the relevant factors to determine which bid is the most cost effective, as required by the Commission’s
Rules.83 After certain contracts were awarded to NSS, USAC requested supporting documentation from
75 FY2013, Form 465, HCP 10269, Form 465 Application No. 43134249 (May 28, 2013).
76 See Email from Scott Madison, President, NSS, to , Sales, Regional Sales Companies, (May 8,
2013, 2:02 p.m.). See also AT&T Pricing Schedule, Managed Internet Service (MIS) Basic (May 8, 2013).
77 FY2013, Form 466, HCP No. 10296, Form 465 Application No. 43134249, Block 45 (Dec. 20, 2013).
78 FY2013, Form 466, HCP 10296, Form 465 Application No. 43134249, Block 45 (Dec. 20, 2013). See also
Response to Rural Healthcare Division, USAC (RHCD), Information Request Notice to HCP No. 10269, FRN
1337087 (July 16, 2014, 10:03 a m.); Tallahatchie General Hospital, Service Provider Scorecard, FRN 1337087.
79 RHCD, Information Request Notice to HCP No. 10269, FRN 1337087, (July 3, 2014, 11:01 a m.).
80 Response to RHCD, Information Request Notice to HCP No. 10269, FRN 1337087 (July 16, 2014, 10:03 a.m.).
See also Tallahatchie General Hospital, Service Provider Scorecard, FRN 1337087.
81 RHCD Portal Notice to HCP No. 10269, FRN 1337087 (July 24, 2014). A copy of this notice was also provided
to NSS. See also Proposal for Tallahatchie General Hospital. Information on file in EB-IHD-15-0001913. On
April 15, 2014, USAC also approved Tallahatchie’s Form 466-A in connection with the Internet Access Program
requesting support for costs associated with internet access. See RHCD Service Provider Invoice Status Report,
Invoice No. 2014 06-30 FY2013, FRN 13370931 (July 1, 2014).
82 See Email from Scott Madison, President, NSS, to , Sales, Regional Sales Companies (July 25,
2014, 2:02 p.m.) (“Bottom line is that NNS [sic] will honor the agreement and there [sic] net pay.”). Tallahatchie
was required to pay only $ of the $ invoiced by NSS per month. See NSS Invoice No.
0000483131201, Account No. 00483-2108 (Dec. 1, 2013). Compare NSS Dedicated Internet Access Service
Agreement (July 20, 2013) (contract rate of $ per month), with AT&T Pricing Schedule, Managed Internet
Service (MIS) Basic (May 8, 2013) (contract rate of $ per month) (resulting in a markup by NSS of 525
percent).
83 The use of a scoring matrix is not required under the Rules but is a useful tool for documenting the criteria used in
evaluating bids and selecting the most cost-effective method of providing the services requested on the Form 465.
See USAC Rural Health Care, Telecommunications Program, Health Care Providers, Step 2: Evaluation Criteria &
Service Requests, http://www.usac.org/rhc/telecommunications/health-care-providers/step02 (last visited Oct. 31,
2016); see also 47 CFR § 54.603. The HCP certifies on the Form 466 that it “has considered all bids received and
selected the most cost-effective method of providing the requested service or services.” See FCC Form 466, Block
8: Certification.
Federal Communications Commission FCC 16-158
14
the HCPs, including bid matrices. In a number of instances, the HCPs at issue apparently never prepared
bid matrices prior to, or contemporaneous with, awarding contracts to NSS. Instead, in specific instances,
NSS and these HCPs apparently misled USAC and the Commission by proffering bid matrices that were
not considered by the HCPs as part of their decision making process but were created well after the
contracts had been awarded to NSS.
36. NSS apparently misrepresented its compliance with the Commission’s Rules through the
use of bid matrices that were generated well after contracts were awarded to NSS. That is to say, these
bid matrices were not prepared contemporaneously with the submission of bids, and were not considered
by the HCPs as part of their decision-making process. In doing so, NSS coordinated with HCPs to
present inaccurate information to USAC and the Commission that the competitive bidding processes were
fair and open.
37. NSS provided bid matrices to HCPs after NSS was awarded contracts by HCPs, and only
after USAC requested such documents from the HCPs. NSS provided material direction to the HCPs
about how to construct the bid matrices, including which factors to include and how much weight to
apply to those factors. NSS also sought to review the bid matrices before they were submitted to USAC.
These post facto bid matrices apparently sought to justify the HCPs’ selection of NSS as the winning
bidder, and made it appear to USAC and the Commission as though NSS was selected through a process
in which bid matrices were fairly evaluated prior to the awarding of a contract.
38. One such example of NSS’s participation in the construction of a post facto bid matrix
concerned HCP Texoma, where a bid matrix was apparently constructed more than eight months after
NSS was awarded the contract. After NSS and other service providers submitted bids in response to
Texoma’s Form 465, Texoma awarded the contract to NSS on or about December 16, 2013.84 On or
about August 27, 2014, after Texoma filed for USF support, USAC requested Texoma provide its
selection criteria and explain why it selected NSS.85
39. On August 29, 2014, two days after USAC requested Texoma’s bid matrix,
reported to Madison and that s/he discussed the USAC inquiry and request for a bid matrix
with Texoma’s Director of Information Technology, and that Texoma “is going to research [its] records
and complete the matrix. Once [it] has done so, [it] will send it to me for review.”86 added that
Texoma “is confident that between price and customer care NSS will prevail” in the outcome of the post
facto bid matrix analysis for the contract NSS was already awarded.87 In a different email discussion,
others at NSS discussed relevant bid matrix elements that should be conveyed to Texoma and, on August
30, 2014, Madison directed that “verbal communication is the next steps [sic], nothing in email.”88
84 See FY2013, Form 465, HCP No. 33245, Application No. 43137960, (Sept. 10, 2013); see also NSS Point to
Point Dedicated Service Agreement (Dec. 16, 2013).
85 RHCD Information Request Notice to HCP No. 33245, FRN 1348976 (Aug. 27, 2014); see also Email from RHC
Admin, USAC to John Pack, Texoma (Sept. 8, 2014, 4:17 p m.); Email from , Compliance
Specialist, NSS, to Scott Madison, President, NSS, and , Director of Operations, NSS, RE:
Texoma (Aug. 29, 2014, 2:42 p.m.).
86 Email from , Compliance Specialist, NSS, to Scott Madison, President, NSS, and
, Director of Operations, NSS, RE: Texoma (Aug. 29, 2014, 7:42 p.m.).
87 Id.
88 Email from Scott Madison, President, NSS, to , Director, Business Development, NSS, and
, Major Account Executive, NSS, FW: Texoma (Aug. 30, 2014, 12:30 a.m.) (stating that “price has to be
weighted the heaviest, total score adding to 100”).
Federal Communications Commission FCC 16-158
20
55. The most egregious examples included situations where HCPs had existing service
contracts with AT&T.128 In these instances, AT&T AM-1 introduced the HCPs to NSS where AT&T
AM-1 was the designated representative for AT&T.129 NSS then pitched its “full funding” program where
the HCP paid only a small portion of its total invoice and the remaining balance would be paid to NSS
from the Fund. As part of this “partnership,” AT&T would not submit a bid for any new Form 465s that
were posted by HCPs AT&T AM-1 introduced to NSS.130 The HCPs then selected NSS as their service
provider, thus replacing AT&T.
56. NSS then did one of two things, depending on the HCP:
? NSS purchased additional telecommunications services from AT&T (through AT&T
AM-1 as the designated representative), which often included upgraded and more
expensive services than AT&T originally provided to the HCPs;131 or
? NSS would make no changes to the existing services being provided to the HCP by
AT&T but would request a change of the billing address so AT&T could send its
invoices to NSS for the services it was providing to the HCP.
In each of these scenarios, NSS would then inflate AT&T’s costs and submit its own invoices to USAC
for payment from the Fund, therefore representing to USAC that NSS and not AT&T was the HCP’s
service provider. NSS never informed USAC that AT&T was in fact providing the underlying service at
a significantly lower price, or that the HCP was still under contract with AT&T for these services. The
difference between what AT&T charged the HCP for the service and what NSS billed USAC simply
constituted NSS’s profit for its limited (if any) added value.
57. Occasionally, HCPs and others raised concerns about what was described by witnesses as
“eye-popping” rates NSS charged to the Fund.132 In those cases, NSS directed the HCPs to focus only on
the portion of the invoice that the HCP was directed to pay, which was typically less than 10 percent of
the total amount NSS invoiced to USAC (the balance of which NSS charged to the Fund).133
128 For SCRMC compare NSS Point to Point Ethernet Service Agreement (Oct. 14, 2013) (indicating the monthly
pre-discount rates of $ or $ for 100 Mbps Ethernet and $ for 1 Gbps Ethernet), with AT&T
Addendum Agreement at 4 (Aug. 29, 2013) (indicating monthly pre-discount rates of $ for 100 Mbps Ethernet
and $ for 1000 Mbps Ethernet) (a markup by NSS of 819 percent or 738 percent for 100 Mbps, and a markup
by NSS of 1203 percent for 1000 Mbps/1 Gbps Ethernet, respectively). For Weems compare NSS Invoice
0000489140401 (Apr. 1, 2014) (indicating monthly pre-discount rates of $ , $ , or $ for MPLS 1.5
Mbps service), with AT&T Invoice 3486732205 (Dec. 5, 2013) (indicating monthly pre-discount rate of $ for
MPLS 1.5 Mbps service) (a markup by NSS of 462 percent, 478 percent, and 386 percent, respectively).
Information on file in EB-IHD-15-0001913.
129 Email from AT&T AM-1 to Keith Pearson, Information Technology, LSMFT, Weems (Oct. 15, 2013, 9:33 a.m.)
(“[A]ttached is the MIS Pricing Schedule for Weems Community Mental Health . . . your monthly rate will be much
lower through [Regional Sales Companies’] partner…”).
130 Information on file in EB-IHD-15-0001913.
131 Plan of Action for Weems Mental Health. Information on file in EB-IHD-15-0001913. See also Email from
, Partner, Regional Sales Companies to AT&T AM-1, RE: FW: [AT&T] Switched Ethernet Network
Contract (Aug. 26, 2013, 4:25 p m.).
132 Information on file in EB-IHD-15-0001913.
133 Information on file in EB-IHD-15-0001913; see also email from , Director of Business Development,
NSS, to Jonathan Hatfield, I/T Manager, Klickitat Valley Health (May 29, 2014, 2:34 p m.) (“I do believe we can
address everyone’s concern about the top line number. Our service agreements put the entire burden of that high
number on our plate. Network Services accepts the responsibility so that you [sic] only commitment is to the Net
(low number). That is in BACL [sic] and WHITE in our contract.”).
Federal Communications Commission FCC 16-158
23
to Weems. NSS, in turn, submitted its own inflated invoices to USAC for payment as the purported
service provider of record for Weems.154
64. When Weems’ Information Technology representative received NSS’s first invoice in the
fall of 2013, he emailed an employee of Regional Sales Companies and wrote “I think I just lost my job”
because he received NSS’s “63000 dollar invoice.”155 The invoice referenced by the Weems’ employee
only displayed the amount NSS sought from the Fund, not the considerably smaller cost to be paid by
Weems directly to NSS.156
65. Weems filed Form 466s requesting funding support on June 17, 2014. In September
2014, Weems received one FCL approving support in the amount of $19,973.26, and its contract with
NSS received “Evergreen” status.157 After Weems confirmed its receipt of services, NSS invoiced and
received payment from USAC in the amount of $19,973.26 on or about October 21, 2014, pursuant to its
HSS.158
66. By letter dated January 5, 2015, USAC advised Weems that it had “received allegations
that Network Services Solutions has submitted inflated rate documentation for services that are actually
being provided by an incumbent local exchange carrier” and requested that Weems explain, among other
things, “why Weems is receiving two sets of invoices for the same services.”159 USAC further advised
Weems that the “allegations raise serious questions concerning compliance with FCC rules governing the
RHC Telecommunications Program.”160
67. On January 12, 2015, Weems advised NSS that it “got an alarming letter from USAC
today about investigating [NSS] and our relationship and requesting a lot of info. could you give me a
call. I am basically reaching out to everyone at NSS….thanks.”161 Two weeks later and without
explanation, NSS returned to USAC the $19,973.26 in USF support it received for one FRN related to the
services it claimed to have provided to Weems in FY2013.162 After discussions with NSS, Weems
154 See FY2013, Form 466, HCP No. 26967, FRN 1347006 (June 17, 2014); FY2013, Form 466, HCP No. 26968,
FRN 1347028 (June 17, 2014); FY2013, Form 466, HCP No. 26969, FRN 1347021 (June 17, 2014); FY2013, Form
466, HCP No. 29670, FRN 1347016 (June 17, 2014); FY2013, Form 466, HCP No. 26971, FRN 1347014 (June 17,
2014); FY2013, Form 466, HCP No. 26972, FRN 1347033 (June 17, 2014); FY2013, Form 466, HCP No. 26973,
FRN 1347013 (June 17, 2014); FY2013, Form 466, HCP No. 26974, FRN 1346931 (June 17, 2014). In actuality,
these services had previously been installed by AT&T and the October 5, 2013 install date on the Form 466s appears
to be nothing more than the date that NSS started invoicing Weems for services already being provided by AT&T.
Compare AT&T Invoice No. 9953010207, June 5, 2013, with AT&T Invoice No. 6723141204, October 5, 2013.
See also NSS Invoice dated April 30, 2014, Invoice No. 0000489140401.
155 Email from Keith Pearson, Information Technology, LSMFT, Weems to , Regional Sales
Companies (Nov. 6, 2013, 1:57 p.m.).
156 See Email from , Director of Business Development, NSS, to Scott Madison, President, NSS (Nov. 5,
2013, 1:13 p.m.).
157 FY2013, FCL, HCP No. 26967, FRN 13470061, (Sept. 17, 2014).
158 See RHCD eStatement for NSS (Oct. 21, 2014).
159 Letter from , Vice President, Rural Healthcare Division, USAC to Keith Pearson, Information
Technology LSMFT, Weems (Jan. 5, 2015).
160 Id.
161 Email from Keith Pearson, Information Technology LSMFT, Weems, to , Vice President, Sales,
Eastern Territory, NSS (Jan. 12, 2015, 3:28 p.m.).
162 See USAC Payment Identification Worksheet (Jan. 30, 2015); NSS check no. 8467 in the amount of $19,973.23
(Jan. 30, 2015). See also RHCD eStatement, Network Services Solutions, Weems-Clarke County, HCP No. 26967,
FRN 13470061 (Oct. 21, 2014). Information on file in EB-IHD-15-0001913.
Federal Communications Commission FCC 16-158
26
74. NSS apparently knowingly used sales quotes on fabricated Comcast letterhead to
document urban rates as needed. In an August 7, 2013 email, Madison directed , an
NSS employee, to provide “some dates that support 2012 funding” on sales quotes to serve as urban rate
documents.178 On August 9, 2013, replied to Madison attaching three Comcast sales
quotes with the date “05/09/13” inserted into the quotes. email reply also stated
“05/09/13” and “Before you ask, yes, it is a weekday (Thursday).”179
75. On January 24, 2014, South Sunflower electronically submitted through USAC’s web-
based My Portal application, an exact copy of the “05/09/13” Comcast sales quote for 50 Mbps that
provided to Madison on August 9, 2013 as evidence of an urban rate in FY2012.180
After reviewing South Sunflower’s Form 466, USAC requested that South Sunflower obtain new urban
rate documentation from the service provider (which appeared to be Comcast) because only one of the
previously submitted urban rate letters included a date (March 7, 2013).181
76. These “05/09/13” sales quotes are essentially identical to the ones that were initially
transmitted to USAC by South Sunflower as documentation of the urban rate on June 10, 2013.182 The
only difference between the ‘Comcast’ sales quotes provided by to Scott Madison on
August 9, 2013, the 50 Mbps ‘Comcast’ sales quote submitted by South Sunflower on January 24, 2014,
and the ‘Comcast’ urban rate documents submitted to USAC by South Sunflower on June 10, 2013, is
that the ‘Comcast’ sales quotes forwarded to Madison by email and the 50 Mbps sales
quote submitted to USAC on January 24, 2014, were backdated to “05/09/13” and list the customer of
record as ‘Network Services Solutions, LLC.’183
(Continued from previous page)
Area (100 Mbps). Only the 100 Mbps letter is dated: “March 7, 2013,” which appears to have been manually
entered. None of the three urban rate documents identifies a customer of record, but there are markings above the
listed service address which appear to reflect the manual redaction of the named customer. All three letters bear the
same Comcast trade insignia and employee email address. See e.g., Appendix E.
177 See FY2012, Form 466, HCP No. 12791, FRN 1224839 (June 10, 2013) (urban rate documents). See e.g.,
Appendix E.
178 Email from Scott Madison, President, NSS, to , Billing Manager, NSS (Aug. 7, 2013, 5:33
p.m.).
179 See Appendix G; Email from , Billing Manager, NSS, to Scott Madison, President, NSS (Aug.
9, 2013, 5:16 p.m.). Madison apparently wanted his employee to specifically add dates to urban rate quotes that
occurred during the course of the normal business week to make the forged and backdated quotes more plausible.
Similar to South Sunflower, these three urban rate documents were purportedly issued by “Robyn Milder” of
Comcast’s Mississippi Sales Division (10 Mbps), “Robyn Milder” of Comcast’s Sacramento Service Area (50
Mbps), and “Robyn Midler” of Comcast’s Mississippi Service Area (100 Mbps). See also Appendix F.
180 FY2012, Form 466, HCP No. 12791, FRN 1224839; Response to RHCD Information Request Notice to HCP
No. 12791, FRN 1224839 (Jan. 24, 2014). See also Appendix F.
181 RHCD Information Request Notice to HCP No. 12791, FRN 1224839 (Jan. 24, 2014). Urban rate documentation
should indicate that the rate is available during the funding year. See supra Section II.
182 Compare FY2012, Form 466, HCP No. 12791, FRN 1224839 (urban rate documents), with Email from
, Billing Manager, NSS, to Scott Madison, President, NSS (Aug. 9, 2013, 5:16 p m.). In addition to the same
inconsistent spelling of the last name of the Comcast employee who purportedly issued the documents in question
(Milder and Midler), the documents’ similarities include, among other things, the email address listed for the
Comcast employee, the addresses for the locations where the services were to be received, the respective services
provided (10 Mbps access, 50 Mbps access, and 100 Mbps access), the service rates and installation costs, term
lengths, and trade insignia. See, e.g., Appendix E; Appendix F.
183 The 100 Mbps letter contained the “05/09/13” date as well as the “March 7, 2013” date that was also on the 100
Mbps letter submitted to USAC by South Sunflower on June 10, 2013. Compare FY2012, Form 466, HCP No.
(continued….)
Federal Communications Commission FCC 16-158
28
Comcast stated that it did not possess any documents concerning the email address for the person to
whom NSS attributes these purported urban rate quotes—“Robyn@comcast.com.”194 In each of these
four funding requests described above, urban rate documents were transmitted to USAC via interstate
wire, either directly by NSS or indirectly through the HCPs after NSS furnished them.195 USAC, relying
on these urban rate documents, issued FCLs and HSSs that authorized payments to NSS from the Fund,
and USAC then transmitted USF payments to NSS, via interstate wire.196 As a result, NSS received a
series of payments from the Fund that apparently relied on forged urban rate documents insofar as they
were purportedly issued by Comcast and on the dates indicated on the sales quotes.197
80. As part of the Investigation, the Commission issued a subpoena to NSS and demanded
supporting documentation for a number of the above-referenced urban rates, including HCPs South
Sunflower and Hardy Wilson.198 Despite these specific demands for documents, NSS did not provide any
documents supporting the urban rate forms that it submitted to USAC in connection to Hardy Wilson or
South Sunflower. Additionally, none of the forms that relied on the urban rates discussed above have
been corrected or withdrawn,199 nor have any of the USF payments that USAC disbursed to NSS in
reliance upon this information been returned.200
81. Separate from submitting the apparently forged urban rate documents, NSS apparently
also backdated other documents to make it appear as if the urban rates were available during the
applicable funding year. For example, on August 5, 2013, Madison explicitly requested that
“find a way to insert a date on the pdf document” and if so, to insert dates “for fund year 2012 as
well as fund year 2013” because Madison was “[w]orking on an urban rate quote in this task.”201
Approximately three hours later, replied to Madison, “Here you go,” and attached two
urban rate documents that were exactly the same except one displayed the date “May 21, 2013,”
corresponding to FY2012 and the other “July 10, 2013,” corresponding to FY2013.202
194 Id.
195 See Appendix D. NSS’s transmission, and HCPs’ transmissions caused by NSS, of Form 466s and forged urban
rate documents constitute interstate electronic and wire activity, as Form 466s and forged urban rate documents were
transmitted electronically and by wire from NSS in Nevada and/or HCPs in Mississippi to USAC through USAC’s
network servers located in Virginia. See also supra Section II.
196 See, e.g., FY2012, Form 466, HCP 15801, FRN 12267351 (June 22, 2013) and FY2012, Form 467, HCP No.
15801, FRN 12267351 (Dec. 4, 2013); see also FY2012, FCL, HCP No. 15801, FRN 12267351 (Dec. 3, 2013) and
FY2012, HSS, HCP No. 15801, FRN 12267351 (Dec. 4, 2013).
197 Invoice spreadsheet for HCP No. 12791, FRN 1224839 and FRN 1338163; Invoice spreadsheet for HCP No.
16415, FRN 1347127; Invoice spreadsheet for HCP No. 15801, FRN 12267351. Information on file in EB-IHD-15-
0001913.
198 See FCC Subpoena to NSS, Attachment A, para. 2.o. (Nov. 12, 2015).
199 See Appendix D; see also FY2012, Form 466, HCP No. 15801, FRN 12267351 (June 22, 2013); FY2012, Form
466, HCP No. 12791, FRN 1224839 (June 10, 2013) and FY2013, Form 466, HCP No. 12791, FRN 1338163 (Feb.
1, 2014) and FY2013, Form 466, HCP No. 16415, FRN 1347127 (June 20, 2014).
200 USAC denied Tallahatchie’s request for funding based on its Form 466 submitted on December 20, 2012. See
RHCD Portal Notice to HCP No. 10269, FRN 1337087 (July 24, 2014). Information on file in EB-IHD-15-
0001913.
201 Email from Scott Madison, President, NSS, to , Billing Manager, NSS (Aug. 5, 2013, 12:40
p.m.).
202 Email from , Billing Manager, NSS, to Scott Madison, President, NSS (Aug. 5, 2013, 3:54
p.m.).
Federal Communications Commission FCC 16-158
32
to support its claims for payment from the Fund.222 As discussed above, we find these apparent violations
began no later than 2012 and continue through the present as a result of NSS’s failure to correct the Form
466s that were filed in connection with these activities.223 Pursuant to Section 503(b)(1)(D), we further
find that, in apparent violation of the wire fraud statute, NSS apparently willfully and repeatedly violated
Title 18, United States Code, Section 1343, by forging urban rate documents and transmitting or causing
these documents to be transmitted by interstate wires.224 As discussed above, for multiple years and
continuing through the present, NSS apparently violated the Commission’s Rules and, as a direct result of
these apparent violations, was awarded many contracts from HCPs and received millions of dollars in
improper payments from the Fund.225
A. NSS Apparently Engaged in Competitive Bidding Practiced That Were Not Fair
and Open in Order to Receive Contracts from HCPs in Violation of Rural Health
Care Program Rules
89. As the Commission has repeatedly stated, competitive bidding rules are vital to ensuring
that the USF is “used wisely and efficiently” and that HCPs “are aware of cost-effective alternatives” to
limit waste, fraud and abuse of the Fund. 226 Fundamental to this is the Commission’s consistent
requirement that the competitive bidding process for services supported by the RHC Program be fair and
open, and that no bidders receive an unfair advantage.227 As service providers have long been aware, the
Commission will take action against those that seek to secure an unfair advantage in competing for
222 See 47 CFR §§ 54.603, 54.605, 54.607, 54.609, 54.613, 54.615.
223 See Purple Communications, Inc., Forfeiture Order, 30 FCC Rcd 14892 (2015) (Purple); BellSouth
Telecommunications, LLC, d/b/a AT&T Southeast, Notice of Apparent Liability for Forfeiture, FCC 16-98, para. 67
(July 7, 2016) (BellSouth NAL); Total Call Mobile, Inc., Notice of Apparent Liability for Forfeiture and Order, 31
FCC Rcd. 4191, paras. 81, 89 (2016); Purple Communications, Inc., Notice of Apparent Liability for Forfeiture, 29
FCC Rcd 5491, 5506, n.87 (2014) (Purple NAL); VCI Company, Notice of Apparent Liability for Forfeiture and
Order, 22 FCC Rcd 15933, 15940, para. 20 (2007).
224 See 18 U.S.C. § 1343; 47 U.S.C. § 503(b)(1)(D).
225 We observe the duty of the HCPs to be cost-effective and comport themselves with the rules of the RHC
Program. We acknowledge the participation of certain HCPs and at least one employee of a facilities-based
telecommunications carrier in the conduct at issue. Nevertheless, we need not reach the issue of their conduct given
the fault by NSS violating the Commission’s Rules. Therefore, in our discretion, we do not propose forfeiture
penalties against the facilities-based telecommunications carriers and HCPs identified herein. See, e.g., Federal-
State Joint Board on Universal Service; Changes to the Board of Directors for the National Exchange Carrier
Association, Inc.; Schools and Libraries Universal Service Support Mechanism, Order on Reconsideration and
Fourth Report and Order, 19 FCC Rcd 15252, 15255-57, paras. 10-15 (2004) (Schools and Libraries Fourth Report
and Order) (directing USAC to pursue recovery actions against the party or parties that violated the Commission’s
rules); Request for Review of the Decision by the Universal Service Administrator by Bell South
Telecommunications, Inc. and Union Parish School Board; Schools and Libraries Universal Service Support
Mechanism, CC Docket No. 02-6, Order, 27 FCC Rcd 11208 (Wireline Comp. Bur. 2012) (Bell South Order)
(seeking recovery of funding from the party that violated the Commission’s Rules).
226 See Federal-State Joint Board on Universal Service First Report and Order, Report and Order, 12 FCC Rcd.
8776, 9133-34, paras. 686, 688 (1997).
227 See id.; see also 47 CFR §§ 54.601, 54.603, 54.615; Rural Health Care Support Mechanism, Report and Order,
27 FCC Rcd. 16678, 16778, paras. 229-230 (2012); cf. Schools and Libraries Universal Service Support
Mechanism, Third Report and Order and Second Further Notice of Proposed Rulemaking, 18 FCC Rcd. 26912,
26939, para. 66 (2003) (Schools and Libraries Third Report and Order) (stating that a fair and open competitive
bidding process is critical to preventing waste, fraud, and abuse of program resources).
Federal Communications Commission FCC 16-158
33
contracts supported by the USF or otherwise engage in conduct that threatens to damage the integrity of
USF programs in violation of the Commission’s Rules.228
90. The Investigation has uncovered that NSS obtained multiple contracts from HCPs for
services supported by the Fund as a result of competitive bidding practices that were not fair and open in
various ways and, in doing so, apparently violated several of the Commission’s Rules.
1. NSS Apparently Received Commitments from HCPs to Provide
Telecommunications Services Prior to the Expiration of the 28-Day Period
and, in Some Instances, Before the Form 465 Was Even Posted, in Violation
of Section 54.603 of the Commission’s Rules
91. The Commission’s Rules provide that telecommunications services to rural HCPs may be
supported by the Fund only if those services are procured through a competitive bidding process.229 The
Commission’s Rules further require HCPs to only “mak[e] commitments” with service providers after 28
days following USAC’s posting of Form 465s soliciting bids.230 NSS acted in concert with HCPs to reach
agreements in principle, and to make commitments to award contracts to NSS prior to the expiration of
the 28-day waiting period, and in some cases even prior to USAC’s posting of a Form 465 soliciting
bids.231
92. For example, NSS apparently obtained commitments from HCP Tallahatchie before
Tallahatchie filed its Form 465 for FY2013.232 In this instance, Madison ordered the underlying service
from AT&T for Tallahatchie before USAC posted the Form 465 for FY2013 and therefore prior to the
expiration of the 28-day waiting period.233 NSS’s representative also emailed Madison more than three
months prior to the posting of the Form 465 stating that s/he “ha[s] been assured” that Tallahatchie would
award NSS its contract.234 NSS apparently advised Tallahatchie to ignore a bid from an NSS competitor,
which was approximately 20 percent of the cost NSS charged the Fund for substantially similar
services.235
228 See id. The Commission’s fair and open competitive bidding requirements date back to the inception of the USF
and have always applied to service providers. In July 1997, the Commission granted a limited waiver to the
competitive bidding rules for contracts signed before the competitive system became fully operational, noting that
the exemption applied to “schools, libraries, and service providers.” Federal-State Joint Board on Universal
Service, Order on Reconsideration, 12 FCC Rcd. 10095, 10098, paras. 9-10 (1997). In December 1997, the
Commission extended the rules regarding support for existing contracts to the rural health care program to “reduce
potential confusion on the part of program participants and providers.” Federal-State Joint Board on Universal
Service, Fourth Order on Reconsideration 13 FCC Rcd. 2372, 2445, para. 219 (1997). Service providers have been
on notice that funding commitments resulting from contracts awarded in violation of the competitive bidding rules
will be rescinded and the disbursed funds recovered. In 2007, the Commission noted that “the danger of waste,
fraud, and abuse by service providers is as great as the danger of such conduct by rural health care providers” and
advised that “funds disbursed from the rural health care support mechanism in violation of a Commission rule that
implements the statute or a substantive program goal will be recovered and that sanctions, including enforcement
actions would be appropriate in cases of waste, fraud, and abuse…”. In the Matter of Comprehensive Review of the
Universal Service Fund Management, Administration, and Oversight, Report and Order, 22 FCC Rcd. 16372,
16385-86, paras. 26, 30 (2007) (Comprehensive Report and Order).
229 47 CFR § 54.601(c)(1).
230 47 CFR § 54.603(b)(3).
231 See supra Section III.A.
232 See id.
233 See id.
234 See id.
235 See id.
Federal Communications Commission FCC 16-158
34
93. Likewise, HCP Bond made commitments to NSS prior to the time Bond filed and USAC
posted its revised Form 465 in August 2013, and agreed in principle to award its contract to NSS without
considering other potential competing bids.236 Indeed, it appears Bond’s putatively competitive bidding
process for its revised Form 465 was illusory, with NSS having already “won” Bond’s contract pursuant
to the June 2013 Form 465.
2. NSS Created Post Facto Bid Matrices to Apparently Deceive USAC and the
Commission into Believing that Competitive Bidding Processes were Fair
and Open, in Violation of Sections 54.603 and 54.615 of the Commission’s
Rules
94. Sections 54.603 and 54.615 of the Commission’s Rules require HCPs to select “the most
cost-effective method” in response to their Form 465s, which is “the method that costs the least after
consideration of the features, quality of transmission, reliability, and other factors that the health care
provider deems relevant to choosing a method of providing the required health care services.”237 To
assess the various bids HCPs receive, HCPs are encouraged to create bid matrices that weigh price,
service, and other factors as articulated by the Commission’s Rules to evaluate which bidder is the most
cost-effective and therefore which bidder should be awarded the contract.238 Therefore, if bid matrices
are used, they should be prepared and studied by HCPs prior to the time they award contracts in response
to multiple bids, and not after the contract was awarded, which inherently defeats the purpose of a bid
matrix in its entirety. A bid matrix created after the contract award and in concert with the selectee
renders the evaluation process meaningless. By creating bid matrices only after NSS was awarded
contracts and USAC required documentation justifying NSS’s selection, NSS coordinated with HCPs to
deceive USAC and the Commission into believing that NSS won contracts as a result of fair and open
competitive bidding, when this was not the case.239
95. In order to assess whether NSS won contracts as a result of competitive bidding that
complied with the Commission’s Rules, USAC requested that HCPs Texoma, SCRMC, and East Central
explain the criteria they used to select NSS. These HCPs, with NSS’s substantial assistance, responded to
USAC’s requests by producing what were represented as bid matrices used by HCPs to objectively weigh
the various factors to determine which bidder was most cost-effective.240 The bid matrices sent to USAC
in response to these requests were not part of the HCPs’ evaluation processes but were prepared and sent
to USAC only after such documents were requested by USAC—well after the contracts were already
awarded to NSS.241 These documents were apparently constructed to give USAC and the Commission the
false impression that they were generated contemporaneously with the bid review process, and that NSS
was awarded contracts only after an objective analysis by HCPs as memorialized by the bid matrices.
96. NSS received contracts from HCPs and funds from the USF as a result of a competitive
bidding process that was not fair and open in apparent violation of the Commission’s Rules due to NSS’s
substantial role in the preparation of post facto bid matrices for HCPs Texoma and East Central.242
236 See id.
237 47 CFR §§ 54.603(b)(4), 54.615(c)(7).
238 See id.
239 See supra Section III.A.
240 See id.
241 See id.
242 See id.
Federal Communications Commission FCC 16-158
36
access”252 to such information, NSS received competitors’ urban rate information as it constructed its own
bids.253 As a result of receiving its competitors’ urban rate information, NSS was able to discern the
competitors’ profit calculations and other insights into the competitors’ confidential business operations.
In addition to the urban rate information, NSS also received the proposed costs and services from a
competitor’s bid.254 As a direct result of NSS’s receipt and use of a competitor’s confidential information,
NSS was able to obtain an unfair advantage in the competitive bidding process and, therefore, place itself
in a superior position to win the contract with Weems. In addition to obtaining an unfair advantage in
bidding on Weems’s contracts, the pipeline of information from AT&T AM-1 to NSS provided another
means by which NSS exploited private information to gain an advantage over its competitors in obtaining
contracts in the RHC Program.
B. NSS Apparently Violated the Commission’s Rules by Inflating Rural Rates Charged
to HCPs to Improperly Increase Its Payments from the Fund, in Violation of
Sections 54.607 and 54.609 of the Commission’s Rules
101. As noted above, NSS is a reseller of telecommunications services and is not a facilities-
based service provider. NSS provides telecommunications services to HCPs in connection with the RHC
Program. The Commission’s Rules dictate how service providers calculate rural rates in connection with
submissions for payments from the Fund where that is the case:
If the telecommunications carrier serving the health care provider is not providing any
identical or similar services in the rural area, then the rural rate shall be the average of
the tariffed and other publicly available rates, not including any rates reduced by
universal service programs, charged for the same or similar services in that rural area
over the same distance as the eligible service by other carriers. If there are no tariffed or
publicly available rates for such services in that rural area, or if the carrier reasonably
determines that this method for calculating the rural rate is unfair, then the carrier shall
submit for the state commission's approval, for intrastate rates, or the Commission's
approval, for interstate rates, a cost-based rate for the provision of the service in the
most economically efficient, reasonably available manner.255
102. In response to the Commission’s subpoena, NSS did not produce any averaging of tariff
rates or publicly available rates, or submissions to state commissions or the Commission for approval, as
the Commission’s Rules require.256 The Bureau’s review of hundreds of thousands of documents related
to the Investigation also failed to identify any evidence that NSS calculated its rural rates in accordance
with these requirements.257 The Investigation shows, instead, that NSS’s principal method of calculating
its rural rates was to maximize the amount of money NSS charged HCPs and obtained from the Fund.
103. Internal NSS emails are replete with references to maximizing the amount of money NSS
could obtain from the Fund as the paramount goal, regardless of whether the rates charged comply with
the Commission’s Rules or even constitute reasonable profits above the cost of providing service.258 NSS
252 See Email from , Director of Business Development, NSS, to Scott Madison, President, NSS, et al.,
Please Read – and confirm your understanding. Important Urban rate project (Sept. 4, 2013, 3:35 p m.).
253 See supra Section III.A.
254 See id.
255 47 CFR § 54.607(b).
256 See supra Section III.B.
257 See id.
258 See, e.g., Email from , Director of Business Development, NSS to , Sales, Regional
Sales Companies, , Partner, Regional Sales Companies (Nov. 18, 2013, 10:20 a.m.) (“This is what we
talked about in terms of how aggressive we want to be.”); Email from , Sales, Regional Sales
(continued….)
Federal Communications Commission FCC 16-158
37
employees and representatives, including Madison, regularly discussed how high of a markup NSS could
charge HCPs and the Fund, as high as 1100 percent above what NSS paid to procure the underlying
service, divorced from the requirements of the Commission’s Rules to calculate the rural rate.259
Witnesses described “eye-popping” rates NSS was charging HCPs and the Fund, and directed HCPs to
only focus on the portion the HCPs were responsible for paying, highlighting the limited concern NSS has
for the Fund.260 This is particularly the case where NSS, as frequently occurred, merely “re-billed”
services it purchased from facilities-based service providers without providing (or providing minimal)
additional value-added services.261
104. Here too, we see the interconnection of NSS’s scheme. NSS and its representatives used
the company’s unique relationship with AT&T AM-1 to cultivate relationships with HCPs that allowed
NSS to charge markedly inflated rural rates and earn the trust of HCP employees to do so.262 By
misrepresenting to the HCPs the actual cost of the services through its use of “please pay” amounts versus
the significantly higher amounts invoiced to the Fund through USAC,263 NSS was able to improperly
inflate the rural rates charged to HCPs and supported by the Fund. NSS’s rural rate inflation is further
evidenced by the disparate amounts charged by NSS where an HCP has funded and unfunded sites. NSS
rebilled HCPs approximately 75 percent less for services it procured from facilities-based carriers when
those services not supported by the Fund.264
C. NSS Apparently Violated the Commission’s Rules Through Its Use of Apparently
Forged and False Documents to Improperly Increase Payments Received from the
Fund
105. As outlined above, the Investigation uncovered evidence that NSS submitted and caused
HCPs to submit apparently forged and false documents to increase the amount of money NSS obtained
from the Fund.
106. The Commission’s Rules mandate how service providers are to calculate urban rates. If
the rural site is located within the standard urban distance,265 “the urban rate for that service shall be a rate
no higher than the highest tariffed or publicly available rate charged to a commercial customer for a
functionally similar service in any city with a population of 50,000 or more in that state, calculated as if it
were provided between two points within the city.”266 If the rural site is located beyond the standard
urban distance, “the urban rate for that service shall be a rate no higher than the highest tariffed or
(Continued from previous page)
Companies to , Director of Business Development, NSS, , Partner, Regional Sales
Companies (Nov. 18, 2013, 11:22 a m.) (“I understand this, but how did you come up with this number? Is this just
a fictional number you made up or what is the guidelines to it?”).
259 See Emails between Scott Madison, President, NSS, , Director of Business Operations, NSS,
and , Director of Business Development, NSS (July 18, 2014) (discussing NSS’s proposed 1147 percent
profit margin over the cost of obtaining the underlying services).
260 See supra Section III.B.
261 See id.
262 See id.
263 See id.
264 See id.
265 “The ‘standard urban distance’ for a state is the average of the longest diameters of all cities with a population of
50,000 or more within the state.” 47 CFR § 54.605(c).
266 47 CFR § 54.605(a).
Federal Communications Commission FCC 16-158
38
publicly-available rate charged to a commercial customer for a functionally similar service provided over
the standard urban distance in any city with a population of 50,000 or more in that state.”267
107. As with its rural rates, NSS’s determinations of urban rates apparently are not calculated
in the manner required by the Commission’s Rules. There is no evidence before the Commission that
NSS ascertained the highest tariffed or publicly available rates charged to commercial customers for
functionally similar services for every urban rate it proffered to HCPs, USAC, and the Commission.268
Instead, NSS has apparently engaged in a widespread scheme to use apparently false and misleading
urban rates to underpin its claims for funds from the USF.
1. NSS Apparently Violated the Commission’s Rules Through Its Use of
Apparently Forged Urban Rate Documents, in Violation of Sections 54.605,
64.609, and 54.613 of the Commission’s Rules
108. NSS and its representatives appear to have manually applied Comcast’s trade insignia to
documents NSS, its employees, and representatives created to give the false impression that they were
actually issued by Comcast.269 The record before the Commission demonstrates that Comcast did not
issue these sales quotes, as established by the fact that Comcast provided a sworn declaration that the
individuals that purportedly issued the Comcast sales quotes were neither employed by nor affiliated with
Comcast at any point, nor did their putative employee email address even exist.270 When NSS was served
with a Commission subpoena seeking documents that supported its purported urban rates, NSS did not
produce any responsive documents271—and indeed could not do so because apparently such documents do
not exist. In addition, the record demonstrates that NSS’s employees backdated and post-dated certain
documents at Madison’s direction.272
2. NSS Apparently Violated the Commission’s Rules When It Falsely
Represented that the Urban Rate for Certain Services Was $138.00 Per
Month, in Violation of Sections 54.605, 64.609, and 54.613 of the
Commission’s Rules
109. In addition to its use of apparently forged sales quotes as urban rate documents, NSS
submitted letters containing misrepresentations on its own letterhead in order to support the urban rates
listed on Form 466s filed by the HCPs it serviced.273 In these letters, NSS asserted that the urban rate for
different services in different cities, as outlined in Appendix A, were all $138.00 per month and proffered
such letters in at least 83 instances.274 The Commission sought to corroborate the rates with the
underlying service provider identified in NSS internal documents. In response to a Commission
subpoena, the service provider was not able to produce any responsive documents showing that these
different services in different cities were ever offered to commercial customers at $138.00 per month.275
The Commission also issued a subpoena to NSS for the documents that supported its assertions that these
services in urban areas cost $138.00 per month. However, as with the apparently forged sales quotes, the
267 47 CFR § 54.605(b).
268 See supra Section III.B.
269 See supra Section III.C.
270 See id.
271 See id.
272 See id.
273 See id.
274 See id.
275 See id.
Federal Communications Commission FCC 16-158
39
supporting documents apparently do not exist. NSS did not produce responsive documents to support its
urban rate letters, and NSS’s own Compliance Specialist stated that USAC regarded them as “ ”276
D. NSS Apparently Committed Wire Fraud
110. Pursuant to Section 503(b)(1)(D) of the Act, we find that NSS apparently knowingly,
willfully, and with reckless indifference to the truth violated the federal wire fraud statute (18 U.S.C. §
1343). Congress has authorized the Commission to assess a forfeiture penalty for such violations.
Specifically, Section 503(b)(1)(D) states that the Commission may propose a forfeiture against a person
that the Commission has determined violated “any provision of section . . . 1343 . . . of title 18.”277 The
Commission’s Rules further provide that a “forfeiture penalty may be assessed against any person found
to have . . . [v]iolated any provision of section . . . 1343 . . . of Title 18, United States Code.”278
111. Section 1343 provides that a violation of the wire fraud statute occurs when a person:
having devised or intending to devise any scheme or artifice to defraud, or for
obtaining money or property by means of false or fraudulent pretenses,
representations, or promises, transmits or causes to be transmitted by means of
wire, radio, or television communication in interstate or foreign commerce, any
writings, signs, signals, pictures, or sounds for the purpose of executing such
scheme or artifice.279
112. A finding that wire fraud has occurred “requires proof of (1) a scheme to defraud; and (2)
the use of an interstate wire communication to further the scheme.”280 “The essence of a scheme is a plan
to deceive persons as to the substantial identity of the things they are to receive in exchange. A pattern of
deceptive conduct may show the existence of a plan, scheme or artifice.”281 Where one scheme involves
several wire communications or mailings, “the law is settled that each mailing [or wire communication]
constitutes a violation of the statute.”282 The use of mail or interstate wires to effectuate the fraudulent
scheme “need not be an essential element of the scheme;” instead, it is “sufficient for the mailing [or the
use of the interstate wire] to be incident to an essential part of the scheme or a step in the plot.”283 One
need not have used the wires themselves in the scheme to defraud; instead, culpability may arise from
having caused the wires to be used.284
276 See id.
277 47 U.S.C. § 503(b)(1)(D).
278 47 CFR § 1.80(a)(5). See also KHTK (FM), Notice of Apparent Liability, DA 92-1064, 7 FCC Rcd 5108, 5109
(Mass Media Bur. 1992) (finding licensee apparently liable for a forfeiture under Section 503(b) of the Act based on
a violation of wire fraud under 18 U.S.C. § 1343).
279 18 U.S.C. § 1343.
280 United States v. Maxwell, 920 F.2d 1028, 1035 (D.C. Cir. 1990); see also United States v. Pollack, 534 F.2d 964,
971 (D.C. Cir. 1976).
281 United States v. Brien, 617 F.2d 299, 307 (1st Cir. 1980) (citations omitted).
282 United States v. Philip Morris USA, Inc., 566 F.3d 1095, 1116 (D.C. Cir. 2009) (citations omitted); see also
United States v. Sum of $70,990,605, 4 F. Supp. 3d 189, 201 n.9 (D.D.C. 2014) (“Because the mail and wire fraud
statutes are similar, cases construing mail fraud apply to the wire fraud statute as well.”) (internal quotations
omitted).
283 Schmuck v. United States, 489 U.S. 705, 710 (1989) (citations, quotations, and punctuation omitted).
284 See Pereira v. United States, 347 U.S. 1, 8 (1954) (“To constitute a violation of these provisions, it is not
necessary to show that petitioners actually mailed or transported anything themselves; it is sufficient if they caused it
to be done.”); United States v. Lemire, 720 F.2d 1327, 1334 n.6 (D.C. Cir. 1983) (“[C]ases construing mail fraud
apply to the wire fraud statute as well.”).
Federal Communications Commission FCC 16-158
40
113. An intent to defraud includes an act undertaken “willfully and with specific intent to
deceive or cheat, ordinarily for the purpose of either causing some financial loss to another or bringing
about some financial gain to one’s self.”285 “The requisite intent under the federal mail and wire fraud
statutes may be inferred from the totality of the circumstances and need not be proven by direct
evidence.”286 Fraudulent intent may be “shown if a representation is made with reckless indifference to
its truth or falsity,”287 as well as a victim’s reliance on the misrepresentations made by the perpetrator.288
114. We find that NSS apparently knowingly, willfully, and with reckless indifference to the
truth violated Title 18, United States Code, Section 1343 by transmitting forged documents containing
false information through interstate wire, and causing HCPs to transmit forged documents containing
false information to USAC through interstate wire, in furtherance of a scheme to defraud, resulting in
USAC disbursing via interstate wire USF support to which NSS was not entitled.289 The purpose of these
apparently forged urban rate documents was to increase the amount of support NSS received from the
Fund as a result of the RHC Telecommunications Program’s funding formula, in which payments are
calculated by determining the difference between the higher cost of providing services in a rural area and
the lower cost of providing the same services in an urban area.
115. As detailed above and in Appendix D, on no less than five occasions, NSS supplied
HCPs with forged documents purportedly issued by Comcast and which contained false material
information related to urban rates that the HCPs subsequently electronically transmitted to USAC. The
Investigation revealed that Madison directed an NSS employee to backdate the forged urban rate
documents to correspond to “2012 funding support,” and the employee gave Madison three forged
Comcast sales quotes bearing the date of “05/09/13,” which corresponded to FY2012. 290 At least one of
these three forged and backdated Comcast sales quotes was transmitted to USAC as documentation of the
urban rate in support of a funding request for FY2012.291 As demonstrated by Comcast’s response to the
Bureau’s LOI, Comcast did not issue any of these urban rate documents, did not offer the
telecommunications services at the prices listed in the documents, and had no record of “Robyn Midler”
or “Robyn Milder,” who purportedly issued the documents on Comcast’s behalf, being a Comcast
employee, independent contractor, agent, or other representative.292 Additionally, a plain review of all of
285 United States v. Lemire, 720 F.2d 1323, 1341 (D.C. Cir. 1983).
286 United States v. O’Connell, 172 F.3d 921 (D.C. Cir. 1998); see also United States v. Alston, 609 F.2d 531, 538
(D.C. Cir. 1979).
287 United States v. Cusino, 694 F.2d 185, 187 (9th Cir. 1982); see also United States v. Kennedy, 714 F.3d 951, 958
(6th Cir. 2013); United States v. Jackson, 524 F.3d 532 (4th Cir. 2008); United States v. DeRosier, 501 F.3d 888,
897–98 (8th Cir. 2007).
288 United States v. Wynn, 684 F.3d 473 (4th Cir. 2012).
289 USAC’s network servers are currently located in Virginia. The apparently forged urban rate documents concern
HCPs located in Mississippi and may have been transmitted by NSS to certain consultants located in Kentucky and
Connecticut, who then transmitted these apparently forged documents to USAC. NSS’s principal place of business
is located in Nevada. As a result, all Form 466s that rely on forged urban rate documents and data transmissions by
NSS of the forged urban rate documents were the result of interstate electronic and wire activity. Additionally, USF
payments made by USAC in reliance upon these apparently forged documents and false information were sent to
NSS via interstate wire.
290 Email from , Billing Manager, NSS, to Scott Madison, President, NSS (Aug. 9, 2013, 5:16
p.m.). See also Appendix E; Appendix F; Appendix G.
291 See Invoice spreadsheet for South Sunflower, FY 2012, HCP No. 12791, FRN 1224839, on file in EB-IHD-15-
0001913.
292 See supra Section III.C.
Federal Communications Commission FCC 16-158
41
these urban rate documents reveals significant internal inconsistencies and what appear to be markings
from the manual pasting of Comcast’s trade insignia.293
116. The Investigation uncovered that on five occasions apparently forged urban rate
documents were transmitted to USAC and were used to support information contained in four Form 466s
that HCPs South Sunflower, Hardy Wilson, and FGH/MGH filed with USAC. NSS utilized, or caused
HCPs to utilize, interstate wires to transmit each of these apparently forged urban rate documents to
USAC in connection with NSS’s claims for support from the Fund and caused USAC to utilize interstate
wires to transmit payments to NSS in reliance on these apparently forged documents.294 As a result of its
reliance on information contained in the forged urban rate documents, which also appeared in the Form
466s, USAC disbursed via interstate wire USF support to NSS to which NSS was not entitled.295
Therefore, pursuant to Section 503(b)(1)(D), the Commission finds that NSS apparently violated the wire
fraud statute.
E. Joint and Several Liability of NSS and Scott Madison
117. Based upon the facts and circumstances of this case, NSS and Madison are jointly and
severally liable for any forfeiture penalties.
118. The Commission may “pierce the corporate veil” and hold one entity or individual liable
for the acts or omissions of a different, related entity when: (1) there is a common identity of officers,
directors or shareholders; (2) there is common control between the entities; and (3) it is necessary to
preserve the integrity of the Communications Act and to prevent the entities from defeating the purpose of
statutory provisions.296 Here, NSS is apparently the corporate vehicle for the activities of one person,
Scott Madison. In all material respects, the evidence shows that Madison alone controls NSS.
119. At all times relevant to the violations described in this NAL, Madison shared a common
identity with and control over NSS. Until 2014, Madison was apparently the sole shareholder of NSS.
Upon the hiring of in 2014, Madison gave shares, while
Madison retained voting shares.297
.298
293 See Appendix E; Appendix F; Appendix G.
294 As discussed above, NSS is located in Nevada; South Sunflower, Hardy Wilson, and FGH/MGH are located in
Mississippi; USAC is headquartered in Washington, DC with its network servers located in Virginia. See supra
Section II. South Sunflower and Hardy Wilson used USF Healthcare Consulting, Inc., a healthcare consultant
located in Kentucky, to file their Form 466s; FGH/MGH used PEM Filings, LLC, a healthcare consultant located in
Connecticut, to filing its Form 466. See FY 2012, Form 466, HCP No. 12791, FRN 1224839 (June 10, 2013) and
FY 2013, Form 466, HCP No. 12791, FRN 1338163 (Feb. 1, 2014); FY 2013, Form 466, HCP No. 16415, FRN
1347127 (June 20, 2014), and FY 2012, Form 466 HCP No. 15801, FRN 12267351 (June 22, 2013).
295 The Commission recognizes that violations of Title 18, United States Code, Section 1343 can take many forms
including, but not limited to, each instance in which USAC, in reliance upon these apparently forged urban rate
documents, issued USF payments through interstate wires to NSS.
296 See TelSeven, LLC, Patrick B. Hines, Forfeiture Order, 31 FCC Rcd. 1629, 1633-36 (2016); see also TelSeven,
LLC, Patrick B. Hines, Notice of Apparent Liability for Forfeiture, 27 FCC Rcd. 6636, 6649-50 (2012).
297 NSS Operating Agreement at 19-20.
. See id., Exhibit A. NS 0003717.
.” See Membership
Admission Agreement at 1. NS 0003718.
, Madison would still be in a position to overrule in all matters of NSS’s management.
298 Id. at 19-20, A-1
(continued….)
Federal Communications Commission FCC 16-158
42
Additionally, the Operating Agreement provided that the
.”299 Pursuant to the NSS
Operating Agreement, therefore, any
managerial action taken thereafter required Madison’s consent.300
.”301
120. Madison is apparently the singular financial authority within NSS. Madison was the sole
personal guarantor on at least two loans NSS obtained from financial institutions.302 In his capacity as the
personal guarantor of NSS business loans, Madison “absolutely and unconditionally guarantee[d] full and
punctual payment and satisfaction of Guarantor’s Share of the Indebtedness of Borrower to Lender,”
which was $3,000,000.00.303 Madison further agreed that his personal guaranty for NSS business loans
“will only be reduced by sums actually paid” by Madison and “will not be reduced by payments from
anyone other than” Madison.304 It does not appear that any other individual besides Madison personally
guaranteed NSS’s business loans. Additionally, signatory authority for NSS’s bank accounts appears to
rest almost exclusively with Madison.305
121. Madison is apparently NSS’s sole signatory in its legal filings. Madison signed on behalf
of NSS in various state and federal regulatory filings, including those filed with the Commission, as
NSS’s Managing Member, Managing Partner, or President, both before and after Mountzouris joined
NSS.306
122. The Investigation revealed that almost all of the decisions related to the daily business
operations of NSS were made by Madison, or made with his knowledge. Madison set the profit margins
with regard to contracts involving the procurement of underlying services and contracts with HCPs that
were ultimately submitted in connection with NSS’s claims for USF support. Additionally, personnel
(Continued from previous page)
.”) (emphasis added). NS 0003711-12, 3717.
299 Id. at 8.
300 Id. at 20
301 Id. at 24.
302 See Western Alliance Bank v. Network Service Solutions LLC, Scott Madison, and Doe Defendants I through X,
Application for Appointment of Receiver and Writ of Possession, Case No. CV15-02150 (Second Jud. Dist. Ct.,
Washoe Co., Nev. Nov. 2, 2015), Exhs. 1-26 (Business Loan Agreement, Promissory Note, Commercial Guaranty,
Commercial Security Agreement, First Independent Bank (Jan. 23, 2012); Change in Terms Agreements, First
Independent Bank (Jan. 17, 2013; Apr. 5, 2013; Apr. 15, 2014); Business Loan Agreement, First Independent Bank
(Apr. 15, 2014); Business Loan Agreement, First Independent Bank (Apr. 5, 2013); Commercial Guaranty, First
Independent Bank (Apr. 15, 2014).
303 Id. at Exh. 16.
304 Id.
305 Information on file in EB-IHD-15-0001913. Other signatories on NSS bank accounts appear to be Madison’s
wife, , and the company’s bookkeeper, . However, their roles in the conduct of NSS’s
financial affairs appear to be minor.
306 See, e.g.,
. NS 0003720, 3852, 3967, 3968.
Federal Communications Commission FCC 16-158
43
decisions related to the hiring and terminating of NSS employees and outside contractors were made at
Madison’s sole discretion.307
123. Madison also personally directed or was otherwise intimately involved in much of the
apparently improper conduct described above. For example, he apparently directed and assisted in the
preparation of post facto bid matrices for Texoma, SCRMC, and East Central.308 Madison also had
contemporaneous knowledge that NSS apparently furnished a $10,000 gift to Texoma to induce a contract
award.309 NSS, which Madison controlled, then received USF funding in connection with that contract.310
Madison later sought to explain that the gift was furnished by a rogue employee.311 Further, Madison
apparently knew that both the $138.00 urban rate letters and forged Comcast quotes were invalid and
permitted NSS to submit these documents in support of its claims for USF support in no less than 83
instances.312 All of the apparently false $138.00 urban rate letters on NSS letterhead bear Madison’s
signature and title.313 backdated the date on an apparently forged Comcast sales quote
at Madison’s direction.314 These facts demonstrate that NSS and Madison shared a common identity and
that Madison exercised dominant control over decision making and financial authority within NSS.
124. Furthermore, holding Madison personally liable is necessary to preserve the integrity of
the Communications Act and to prevent entities such as NSS from defeating the purpose of statutory
provisions and the Commission’s Rules. Telecommunications providers must respect the RHC Program’s
competitive bidding and rate rules to prevent waste, fraud, and abuse. The failure to hold Madison
responsible for the forfeiture penalty described in this NAL would establish a loophole in our Rules,
which are aimed to achieve compliance, enforcement, and the recovery of improper payments for conduct
that violates our Rules.315
125. Section 503(b)(1) of the Act specifies that “[a]ny person who is determined by the
Commission … to have willfully or repeatedly failed to comply with any of the provisions of [the] Act or
[Commission] rule . . . shall be liable . . . for a forfeiture penalty.”316 In these circumstances, we are
entitled to look through NSS’s corporate structure to prevent Madison from using a corporate entity to
circumvent these statutory directives and the Commission’s Rules.
126. Accordingly, we find that NSS apparently willfully and repeatedly violated Sections
54.603, 54.605, 54.607, 54.609, 54.613, and 54.615 of the Commission’s Rules. Furthermore, pursuant to
Section 503(b)(1)(D) of the Act,317 we find that NSS apparently violated the wire fraud statute. We find
accordingly that NSS and Scott Madison are for legal purposes one and the same, and are jointly and
severally liable for the resulting forfeiture.
307 See Emails between Scott Madison, President, NSS and , Director of Business Operations,
NSS (Aug. 16-18, 2014).
308 See supra Section III.A.2.
309 See supra Section III.A.3.
310 Id.
311 Id.
312 See supra Section III.C; Appendix C; Appendix D.
313 See supra Section III.C.1.
314 See Appendix E, Appendix F, Appendix G.
315 Id.
316 47 U.S.C. § 503(b)(1) (emphasis added). “The term ‘person’ includes an individual, partnership, association,
joint-stock company, trust, or corporation.” 47 U.S.C. § 153(39).
317 47 U.S.C. § 503(b)(1)(D).
Federal Communications Commission FCC 16-158
44
V. PROPOSED FORFEITURE
127. For the violations at issue here, Section 503(b)(2)(B) of the Act authorizes the
Commission to assess a forfeiture penalty against a telecommunications carrier of up to $189,361 for each
violation or each day of a continuing violation, up to a statutory maximum of $1,893,610 for a single act
or failure to act.318 The Commission retains the discretion to issue forfeitures on a case-by-case basis,
under its general forfeiture authority contained in Section 503 of the 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,”319
as well as our forfeiture guidelines.320
128. Deterring the conduct outlined here and the importance of preserving the Fund for the
critical mission of the RHC Program are of paramount importance to the Commission. In developing an
appropriate forfeiture, we are mindful that this is the first NAL issued in connection with the RHC
Program. The Commission must propose significant forfeitures when—such as here—a service provider
apparently presents forged and false rate documents that are the basis of its claims for universal service
support, receives proprietary information at the exclusion of other market participants, engages in a
relationship with facilities-based providers and HCPs that results in a competitive bidding process that
was neither fair nor open, and comes to agreements in principle with HCPs to receive contracts under the
RHC Program even before the request for bids is made public. This apparent conduct undermines the
fundamental operation of the RHC Program, and therefore warrants a significant proposed forfeiture.
129. Based on the facts and record before us, we have determined that NSS’s apparent
violations involve: (i) receiving numerous contracts for services as a result of competitive bidding that
was not fair and open, including one instance in which a $10,000 network server was provided to the
HCP; (ii) the preparation and transmittal of apparently forged and false urban rate documents; (iii) the
filing of invoices with USAC that contained inflated rural rates; and (iv) wire fraud. We find these
apparent violations occurred, at a minimum, beginning in 2012 and continued through the present as a
result of NSS’s failure to take actions that would have corrected the forms that were filed in connection
with these activities.321
318 See 47 U.S.C. § 503(b)(2)(B); 47 CFR § 1.80(b)(2). These amounts reflect inflation adjustments to the
forfeitures specified in Section 503(b)(2)(B) ($100,000 per violation or per day of a continuing violation and
$1,000,000 per any single act or failure to act). The Federal Civil Penalties Inflation Adjustment Act of 1990, Pub.
L. No. 101-410, 104 Stat. 890, as amended by the Debt Collection Improvement Act of 1996, Pub. L. No. 104-134,
Sec. 31001, 110 Stat. 1321 (DCIA), requires the Commission to adjust its forfeiture penalties periodically for
inflation. See 28 U.S.C. § 2461 note (4). The Commission most recently adjusted its penalties to account for
inflation in 2016. See Amendment of Section 1.80(b) of the Commission’s Rules, Adjustment of Civil Monetary
Penalties to Reflect Inflation, DA 16-644, 2016 WL 3218781 (Enf. Bur. 2016) (ordering inflation adjustments
effective July 1, 2016 and for those penalties assessed after July 1, 2016). NSS filed an FCC Form 499 with the
Commission in which it described its principal communications function as Toll Reseller. See FCC Form 499,
Network Services Solutions, LLC (filer ID 825703). Toll resellers are common carriers for penalty purposes. See,
e.g., Cardinal Broadband LLC, Notice of Apparent Liability for Forfeiture, 23 FCC Rcd. 12233 (Enf. Bur. 2008);
Telrite Corp., Notice of Apparent Liability for Forfeiture, 23 FCC Rec. 7231 (2008).
319 47 U.S.C. § 503(b)(2)(E).
320 See 47 CFR § 1.80(b)(8); Note to Paragraph (b)(8): Guidelines for Assessing Forfeitures.
321 See Purple Communications, Inc., Forfeiture Order, 30 FCC Rcd 14892 (2015) (Purple); BellSouth
Telecommunications, LLC, d/b/a AT&T Southeast, Notice of Apparent Liability for Forfeiture, FCC 16-98, para. 67
(July 7, 2016) (BellSouth NAL); Total Call Mobile, Inc., Notice of Apparent Liability for Forfeiture and Order, 31
FCC Rcd. 4191, paras. 81, 89 (2016); Purple Communications, Inc., Notice of Apparent Liability for Forfeiture, 29
FCC Rcd 5491, 5506, n.87 (2014) (Purple NAL); VCI Company, Notice of Apparent Liability for Forfeiture and
Order, 22 FCC Rcd 15933, 15940, para. 20 (2007).
Federal Communications Commission FCC 16-158
45
130. In accordance with Commission precedent for penalties assessed for violations of the
Commission’s Rules across USF programs, we propose a forfeiture against NSS as follows: (1) a base
forfeiture of $20,000 for each instance in which NSS filed or assisted HCPs in filing Form 466s to USAC
or the Commission that contained false information;322 and (2) an upward adjustment of the base
forfeiture equal to three times the total amount improperly received or requested by NSS. Additionally, in
light of the egregious nature of NSS’s conduct, certain additional upward adjustments are warranted.
131. For the conduct described above, as outlined in Appendix B, NSS submitted or caused
HCPs to submit 175 improper Form 466s that contained apparently false information.323 Of these, 88
Form 466s are associated with NSS’s violations of the Commission’s competitive bidding rules; and 87
Form 466s are associated with NSS’s violations of the Commission’s Rules governing urban rates. The
proposed forfeiture penalty is calculated accordingly.
132. As further described below, in total, we propose a forfeiture penalty of $21,691,498.85
for NSS’s apparent violations.324
A. Proposed Forfeiture Amount for NSS’s Conduct in Apparent Violation of the
Commission’s Competitive Bidding Rules
133. The Commission’s Rules require service providers to participate in, and obtain contracts
from HCPs as a result of, fair and open competitive bidding. When service providers such as NSS receive
contracts as a result of improper conduct in the bidding process such as competitive bidding that is not
fair and open, they receive reimbursement from the Fund to which they are not entitled—even where
there are no other bidders for a given Form 465 request for bids. Without the requisite level playing field
and transparency mandated by the Commission’s Rules, the RHC Program would be susceptible to fraud,
inside dealing, and market manipulation. Such an outcome would present a severe threat to the continued
functioning of the RHC Program and would prevent it from serving its fundamental purpose of allowing
rural health care facilities to enjoy the same advances in telecommunications technology so critical to 21st
century medicine as their urban counterparts.
134. In total, the Investigation uncovered evidence that demonstrates that NSS apparently
violated the Commission’s Rules and Orders requiring fair and open competitive bidding in the RHC
Program, and that 88 of the 175 total Form 466s at issue here resulted in or caused false information to be
322 See, e.g., Budget Prepay, Inc., Notice of Apparent Liability for Forfeiture, 29 FCC Rcd 2508, 2513 (2014). In
Budget Prepay, the Commission imposed a three-part forfeiture for Lifeline violations: (1) a base forfeiture of
$20,000 for each instance in which an ETC files an FCC Form 497 that includes ineligible subscribers; (2) a base
forfeiture of $5,000 for each ineligible subscriber for whom the ETC requests and/or receives support; 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. While we draw on the overall structure of that framework, the calculation related to
the number of ineligible subscribers is not applicable in the Rural Health Care Program context and we do not utilize
it here. See also VCI Company, Notice of Apparent Liability for Forfeiture, 22 FCC Rcd 15933, 15940 para. 18
(2007) (“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.”). On each Form 466, representatives from HCPs certify that “the HCP . . . that I am
representing satisfies all the requirements herein and will abide by all the relevant requirements, including all
applicable FCC rules,” and specifically references the relevant regulation governing fair and open competitive
bidding in the RHC Program. See Form 466, box 47 (citing 47 CFR § 54.603). The Investigation demonstrates that
NSS was intimately involved in the preparation, drafting, and execution of Form 466s by HCPs. Even in those
instances where NSS did not “guide” HCPs in the preparation, drafting, and execution of these forms, the urban and
rural rates contained in each Form 466 can only be provided by the service provider, as that information is not
readily ascertainable by the HCP.
323 Each of the entries in Appendix B relates to a single Form 466, therefore totaling 175 entries.
324 This proposed forfeiture is less than the statutory maximum allowed for the continuing violations cited in this
NAL.
Federal Communications Commission FCC 16-158
46
transmitted to USAC and the Commission. We apply a base forfeiture of $20,000 per form to each of
these 88 Form 466s, for a total base forfeiture of $1,760,000.
135. The loss to the Fund as a result of contracts NSS received in apparent violation of the
Commission’s Rules governing competitive bidding in the RHC Program for HCPs Bond, Weems,
Texoma, and East Central is $1,298,480.74.325 Therefore, we propose an upward adjustment of the base
forfeiture equal to three times the amount NSS improperly received from the Fund, or $3,895,442.22, for
a total proposed forfeiture amount of $5,655,442.22 for NSS’s apparent violations of the Commission’s
Rules governing competitive bidding.
B. Proposed Forfeiture Amount for NSS’s Apparent Violations of the Commission’s
Rules Governing Urban Rates
136. The various submissions of apparently false documents as the basis for NSS’s claims
from the Fund are egregious acts of misconduct, and the Commission proposes a commensurate
forfeiture. The Commission, in the RHC Program and elsewhere, relies on program participants to act
with integrity in submitting claims for support from the Fund.
137. Therefore, the Commission proposes (1) a base forfeiture of $20,000 for each Form 466
for which NSS provided apparently false rate documents, or for which an HCP relied on apparently false
rates as the basis of NSS’s claims from the Fund; (2) an upward adjustment of the base forfeiture equal to
three times the amount NSS improperly received from the Fund as a result of its misconduct; and (3) an
additional upward adjustment of $1,893,610 for each apparently forged document NSS filed, transmitted,
or relied on as the basis of its claims for USF funding.
138. The record before the Commission shows that 87 of the 175 Form 466s at issue here
contain apparently false information from NSS, either where NSS submitted apparently forged Comcast
sales rate quotes or relied on urban rate documents bearing false rates of $138.00 for telecommunications
services. We apply a base forfeiture of $20,000 per form to each of these 87 Form 466s, for a total base
forfeiture of $1,740,000.326 NSS received $2,204,085.21 from the Fund as a result of this conduct, and we
accordingly propose an upward adjustment to $6,612,255.63.
139. Furthermore, in at least four instances in which NSS purposefully submitted apparently
forged Comcast sales quotes as urban rate documentation to increase its amount of funding from the USF,
NSS acted with complete disregard of the RHC Program Rules. The Commission therefore proposes an
additional upward adjustment of $1,873,610 for each of the four Form 466s at issue, for an additional
forfeiture of $7,494,440.327
140. We propose a forfeiture amount of $15,926,695.63 related to NSS’s false urban rate
violations, resulting from a combination of the $1,740,000 base forfeiture for the form 466s supported by
false information, the upwardly adjusted forfeiture of $7,494,440 for the four Form 466s supported by
forged urban rate documents, and the upwardly adjusted forfeiture of $6,612,255.63 for the loss to the
Fund.
325 Neither the base forfeiture nor the loss to the Fund calculations include any FY2013 Form 466s filed by HCPs
Tallahatchie, SCRMC, Weems, or East Central. See supra Section III.A.1 (Tallahatchie); Section III.A.2 (SCRMC
and East Central); Section III.A.4 (Weems).
326 See supra Section III.C.2; Appendix C. See also supra Section III.C.1 (HCPs South Sunflower, Hardy Wilson,
and FGH/MGH); Appendix D. Neither the base forfeiture nor the loss to the Fund calculations include the FY2013
Form 466 filed by HCP Tallahatchie. See supra Section III.C.1.
327 See Appendix D. These particular penalties are proposed for NSS’s use of forged urban rate documents in
apparent violations of RHC Program Rules, specifically 47 CFR §§ 54.605, 54.609, and 54.613. Because we
include a base forfeiture of $20,000 per form for each of the four urban rate documents, we upwardly adjust to
$1,873,610 per form for an additional forfeiture.
Federal Communications Commission FCC 16-158
47
C. Proposed Forfeiture Amount for NSS’s Apparent Violation of the Wire Fraud
Statute Pursuant to Section 503(b)(1)(D)
141. In accordance with our Rules,328 the Commission proposes a base forfeiture of $5,000 for
NSS’s single apparent violation of wire fraud pursuant to Section 503(b)(1)(D).329 In light of the
egregiousness of NSS’s conduct in using apparently forged urban rate documents in furtherance of its
scheme to defraud, and causing USAC to utilize interstate wires to transmit USF payments to NSS in
reliance upon forged documents, a substantial upward adjustment is warranted. Therefore, we propose an
upward adjustment of $189,361, which is the statutory maximum for non-continuing violations.
VI. CONCLUSION
142. In sum, considering NSS’s competitive bidding violations, urban rate violations, as well
as NSS’s violation of the wire fraud statute, we propose a total forfeiture penalty of $21,691,498.85.
143. In addition to assessing a forfeiture, we also believe it is appropriate to order that NSS
repay the amounts improperly overpaid by the Fund as a result of NSS’s apparent violations, and plan to
order a recovery of those disbursements at the forfeiture stage if we conclude that NSS has violated the
Commission’s Rules and Orders. The Commission has stated that “funds disbursed from the . . . rural
health care support mechanism[ ] in violation of a Commission rule that implements the statute or a
substantive program goal should be recovered.”330 To be clear, an erroneous or illegal overpayment from
the Fund must be recouped.331 We have a duty to recover those misspent funds, and if payment is not
received by the Commission as demanded, we have an inherent right to collect332 by exercising available
legal procedures.333 Accordingly, NSS is apparently responsible for returning the RHC Program funds it
received while in violation of the Commission’s Rules.
144. Recovery of such funds is not barred by the passage of time.334 The Commission stated
that funding disbursed in violation of a statute or a rule that implements the statute or a substantive
328 See 47 CFR § 1.80, Section I (Base Amounts for Section 503 Forfeitures).
329 See Appendix D. We note that NSS caused USAC to utilize interstate wires to transmit a USF support payment
to NSS related to HCP Hardy Wilson on or about November 6, 2015.
330 Comprehensive Review of the Universal Service Fund Management, Administration, and Oversight, 22 FCC Rcd
16372, 16387-88, para. 30 (2007).
331 See Fansteel Metallurgical Corp. v. United States, 172 F. Supp. 268, 270 (Ct. Cl. 1959) (“when a payment is
erroneously or illegally made it is in direct violation of article IV, section 3, clause 2, of the Constitution. . . . Under
these circumstances it is not only lawful but the duty of the Government to sue for a refund thereof”); see also Amtec
Corp. v. United States, 69 Fed. Cl. 79, 88 (2005), aff'd, 239 Fed. Appx. 585 (Fed. Cir. 2007).
332 United States v. Wurts, 3003 U.S. 414, 415-16 (1938); United States v. Lahey Clinic Hospital, Inc. 399 F.3d 1, 15
(1st Cir.), cert. denied, 546 U.S. 815 (2005) (the only time a government agency is barred from exercising its right
to recover overpayments is when Congress has clearly manifested its intention to raise a statutory barrier).
333 See 31 U.S.C. §§ 3711, 3716, 3717; 31 CFR §§ 901, et seq., 47 CFR §§ 1.1901, et seq.
334 See BellSouth Telecommunications, LLC d/b/a AT&T Southeast, Notice of Apparent Liability for Forfeiture, ___
FCC Rcd ___, paras. 69-71 (FCC 16-98) (July 27, 2016). See also Holmberg v. Armbrecht, 327 U.S. 392, 396
(1946) (“Traditionally, and for good reasons, statutes of limitation are not controlling measures of equitable relief.”);
United States v. Wurts, 303 U.S. 414, 415-16 (1938) (“The Government by appropriate action can recover funds
which its agents have wrongfully, erroneously, or illegally paid. . . . Ordinarily, recovery of Government funds, paid
by mistake to one having no just right to keep the funds, is not barred by the passage of time.”); Request for Waiver
or Review of a Decision of the Universal Service Administrator by Premio Computer, Inc., Order, 29 FCC Rcd 8185
para. 6 n.16 (Wireline Comp. Bur. 2014) (Premio Computer) (“The Government’s right to recover funds, from a
person who received them by mistake and without right, is not barred unless Congress has clearly manifested its
intention to raise a statutory barrier to recovery. Congress has imposed no such statutory barrier to recovery but, to
the contrary, in the Debt Collection Improvement Act, has generally directed agencies to try to collect a claim of the
(continued….)
Federal Communications Commission FCC 16-158
48
program goal must be recovered in full.335 Based on this mandate, we propose a recovery of
$3,502,565.95 in USF support NSS received as a result of its apparent violations related to competitive
bidding and rates charged in the RHC Program, and wire fraud as described above.
145. As discussed above, we believe that piercing the corporate veil is appropriate in this case.
Based upon the ongoing, widespread conduct exhibited by NSS at Madison’s direction, we find that the
imposition of a significant forfeiture amount is necessary to curtail future violations and imposing a
significant forfeiture should achieve broader industry compliance with the Commission’s Rules.
146. In addition, in light of NSS’s apparent egregious misconduct and demonstrated harm to
the Fund from the apparent violations, we order NSS to submit a report within 30 days of release of this
NAL explaining why the Commission should not: (1) order USAC to hold all payments and
disbursements to NSS; and (2) initiate proceedings against NSS to revoke its Commission authorizations.
147. We recognize that the proposed forfeiture discussed herein may cause uncertainty for
those HCPs that have selected NSS as their service provider. Accordingly, should we determine that
revocation of NSS’s Commission authorizations is appropriate, we will consider using our discretion to
waive Section 54.603(b) of the Commission’s Rules to provide these HCPs with the option of selecting a
new service provider if needed to help alleviate any disruption in service.336
VII. ORDERING CLAUSES
148. Accordingly, IT IS ORDERED that, pursuant to Section 503(b) of the Act, and 1.80 of
the Rules,337 Network Services Solutions, LLC and Scott Madison are hereby NOTIFIED of this
APPARENT LIABILITY FOR A TOTAL FORFEITURE AND ORDER in the amount of
$21,691,498.85 for apparently willfully and repeatedly violating Sections 54.603, 54.605, 54.607, 54.609,
54.613, and 54.615 of the Commission’s Rules338 and apparently knowingly, willfully, and with reckless
indifference to the truth violating Section 1343 of Title 18 of the United States Code.
149. IT IS FURTHER ORDERED that, pursuant to Section 1.80 of the Rules,339 within
thirty (30) calendar days of the release date of this Notice of Apparent Liability for Forfeiture and Order,
NSS and Scott Madison SHALL PAY the full amount of the proposed forfeiture or SHALL FILE a
written statement seeking reduction or cancellation of the proposed forfeiture consistent with paragraph
149 below.
150. 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. NSS shall also send
electronic notification of payment to Loyaan Egal at Loyaan.Egal@fcc.gov, to Rakesh Patel at
Rakesh.Patel@fcc.gov, to Mary Beth DeLuca at MaryBeth.DeLuca@fcc.gov, and to David M. Sobotkin
at David.Sobotkin@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.340 When completing the FCC Form
(Continued from previous page)
U.S. government for money or property arising out of activities of, or referred to, the agency.”) (internal citations
and quotations omitted).
335 Comprehensive Review of the Universal Service Fund Management, Administration, and Oversight, 22 FCC Rcd
at 16387-88, para. 30 (2007); cf. Fifth Report and Order, 19 FCC Rcd 15808, 15815, para. 20 (2004).
336 Northeast Cellular Telephone Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990).
337 47 U.S.C. § 503(b); 47 CFR § 1.80.
338 47 CFR §§ 54.407, 54.409, 54.410.
339 47 CFR § 1.80.
340 An FCC Form 159 and detailed instructions for completing the form may be obtained at
http://www fcc.gov/Forms/Form159/159.pdf.
Federal Communications Commission FCC 16-158
49
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. 20554.341 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.
151. 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.342 The written statement must be mailed to the Office of the
Secretary, Federal Communications Commission, 445 12th Street, SW, Washington, DC 20554, ATTN:
Enforcement Bureau, Federal Communications Commission and must include the NAL/Acct. No.
referenced in the caption. The written statement shall also be emailed to Loyaan.Egal@fcc.gov,
Rakesh.Patel@fcc.gov, MaryBeth.DeLuca@fcc.gov, and David.Sobotkin@fcc.gov.
152. 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.
153. IT IS FURTHER ORDERED that NSS shall respond to the order in paragraph 146
within thirty (30) calendar days of the release date of this Notice of Apparent Liability for Forfeiture and
Order.
341 See 47 CFR § 1.1914.
342 47 CFR §§ 1.16, 1.80(f)(3).
Federal Communications Commission FCC 16-158
50
154. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability for
Forfeiture and Order shall be sent by certified mail, return receipt requested, and first class mail to Scott
Madison, President, Network Services Solutions, LLC, 3700 Barron Way, Reno, NV 89511.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
Federal Communications Commission FCC 16-158
51
APPENDIX A
OVERVIEW OF $138.00 URBAN RATES AS REPRESENTED BY NSS
Service City State Rate Term
100 Mbps Ethernet Little Rock AR $138.00 36 months
100 Mbps MPLS Birmingham AL $138.00 36 months
10 Mbps Ethernet Jackson MS $138.00 36 months
50 Mbps Ethernet Jackson MS $138.00 36 months
100 Mpbs Point to
Point
Jackson MS $138.00 36 months
100 Mbps Switched
Ethernet
Jackson MS $138.00 36 months
1,000 Mbps MPLS Jackson MS $138.00 36 months
10 Mbps Switched
Ethernet
Jackson MS $138.00 36 months
100 Mbps Ethernet New Orleans LA $138.00 36 months
100 Mbps Ethernet Lafayette LA $138.00 36 months
20 Mbps Ethernet Dallas TX $138.00 60 months
100 Mbps Ethernet Dallas TX $138.00 36 months
10 Mpbs Point to
Point
Dallas TX $138.00 36 months
10 Mbps MPLS Memphis TN $138.00 36 months
100 Mbps Ethernet San Francisco CA $138.00 36 months
5 Mbps Ethernet San Francisco CA $138.00 36 months
20 Mbps Ethernet San Francisco CA $138.00 36 months
10 Mbps Ethernet Sacramento CA $138.00 36 months
100 Mbps MPLS Los Angeles CA $138.00 36 months
10.5 Ethernet Los Angeles CA $138.00 36 months
20 Mbps Ethernet St. Louis MO $138.00 36 months
45 Mbps Ethernet Charlotte NC $138.00 36 months
50 Mbps MPLS Raleigh NC $138.00 36 months
10 Mbps Ethernet Lexington KY $138.00 36 months
50 Mbps Ethernet Lexington KY $138.00 36 months
Federal Communications Commission FCC 16-158
52
APPENDIX B
FORM 466s CHARGED
HCP
Number
HCP Name FRN FY
10254 Northeastern Rural Health Clinics, Inc. 1465189 2014
10254 Northeastern Rural Health Clinics, Inc. 1569144 2015
10256 Mountain Valleys Health Centers, Big Valley Health
Center
1465638 2014
10256 Mountain Valleys Health Centers, Big Valley Health
Center
1570623 2015
10256 Mountain Valleys Health Centers, Big Valley Health
Center
1570624 2015
10795 East Central Mississippi Health Care - Sebastopol
Medical Clinic
1455924 2014
10795 East Central Mississippi Health Care - Sebastopol
Medical Clinic
1455926* 2014
10795 East Central Mississippi Health Care - Sebastopol
Medical Clinic
1455927 2014
10795 East Central Mississippi Health Care - Sebastopol
Medical Clinic
1455929 2014
10796 East Central Mississippi Health Care - Walnut Grove
Medical Clinic
1455918* 2014
10797 East Central Mississippi Health Care - Philadelphia
Health Center
1455920* 2014
11142 Mitchell County Hospital 1449767 2014
11852 Mountain Valleys Health Centers, Butte Valley
Health Center
1570625 2015
11856 Childress Regional Medical Center 1449144 2014
12791 South Sunflower County Hospital 1224839 2012
Federal Communications Commission FCC 16-158
53
12791 South Sunflower County Hospital 1338163 2013
12791 South Sunflower County Hospital 1449025 2014
12791 South Sunflower County Hospital 1449153 2014
12816 IHSCAL Toiyabe
1574163 2015
13498 Bond County Health Department 1348427* 2013
13498 Bond County Health Department 1348767* 2013
13498 Bond County Health Department 1456297* 2014
13498 Bond County Health Department 1567571* 2015
13498 Bond County Health Department 1568203 2015
13965 Burney Health Center 1570621 2015
14347 East Carroll Parish Hospital 1465999 2014
15570 Jeff Davis Hospital 1568145 2015
15801 Forrest General Hospital/Marion General Hospital 1226735 2012
15925 Monroe County Hospital 1576349 2015
16153 Electra Memorial Hospital 1450662 2014
16394 Rush Foundation Hospital-Rush Medical Clinic 1343269 2013
16415 Hardy Wilson Memorial Hospital 1347127 2013
16415 Hardy Wilson Memorial Hospital 1466623 2014
Federal Communications Commission FCC 16-158
54
16667 Iraan General Hospital 1449753 2014
16667 Iraan General Hospital 1570993 2015
17021 Mountain Valleys Health Centers, Tulelake Health
Center
1570626 2015
17728 Fall River Valley Health Center 1570622 2015
22207 Community Counseling Services, Inc.-Malvern 1467123 2014
22207 Community Counseling Services, Inc.-Malvern 1467125 2014
22207 Community Counseling Services, Inc.-Malvern 1467126 2014
22207 Community Counseling Services, Inc.-Malvern 1567956 2015
22207 Community Counseling Services, Inc.-Malvern 1567957 2015
22207 Community Counseling Services, Inc.-Malvern 1567958 2015
24921 Hood Memorial Hospital 1466841 2014
26203 North Runnels County Hospital District dba North
Runnels Hospital
1466656 2014
26203 North Runnels County Hospital District dba North
Runnels Hospital
1570936 2015
26967 Weems Mental Health Center - Clarke County 1446204* 2014
26967 Weems Mental Health Center - Clarke County 1462363 2014
26968 Weems Mental Health Center - Jasper County 1462357* 2014
26969 Weems Mental Health Center - Kemper County 1462366 2014
26970 Weems Mental Health Center - Leake County 1462371 2014
Federal Communications Commission FCC 16-158
55
26971 Weems Mental Health Center - Neshoba County 1462373 2014
26972 Weems Mental Health Center - Newton County 1462381* 2014
26973 Weems Mental Health Center - Scott County 1462379 2014
26974 Weems Mental Health Center - Smith County 1462341 2014
27109 Quinco Mental Health Bolivar Facility 1465431 2014
27135 Quinco Mental Health Centers Henderson Facility 1465179 2014
27157 Quinco Mental Health Lexington Facility 1465429 2014
27229 Quinco Mental Health Centers Savannah Facility 1465426 2014
27230 Quinco Mental Health Centers Selmer Facility 1465425 2014
27665 McDuffie Regional Medical Center 1450493 2014
27665 McDuffie Regional Medical Center 1450495 2014
31331 St. Genevieve County Memorial Hospital - Pointe
Bassee Family
1452625 2014
32862 Communicare Oxford 1461380 2014
32862 Communicare Oxford 1461382 2014
32906 Rush Health Systems - John C Stennis Memorial
Hospital
1343287 2013
33245 Texoma Community Center – Cooke 1348862 2013
33245 Texoma Community Center – Cooke 1348881* 2013
33245 Texoma Community Center – Cooke 1348885* 2013
Federal Communications Commission FCC 16-158
56
33245 Texoma Community Center – Cooke 1348886* 2013
33245 Texoma Community Center – Cooke 1348891* 2013
33245 Texoma Community Center – Cooke 1348892* 2013
33245 Texoma Community Center – Cooke 1348895* 2013
33245 Texoma Community Center – Cooke 1348905* 2013
33245 Texoma Community Center – Cooke 1348906* 2013
33245 Texoma Community Center – Cooke 1348907* 2013
33245 Texoma Community Center – Cooke 1348913* 2013
33245 Texoma Community Center – Cooke 1348916* 2013
33245 Texoma Community Center – Cooke 1348919* 2013
33245 Texoma Community Center – Cooke 1348923* 2013
33245 Texoma Community Center – Cooke 1348946* 2013
33245 Texoma Community Center – Cooke 1348949* 2013
33245 Texoma Community Center – Cooke 1348952* 2013
33245 Texoma Community Center – Cooke 1348956* 2013
33245 Texoma Community Center – Cooke 1348957* 2013
33245 Texoma Community Center – Cooke 1348961* 2013
33245 Texoma Community Center – Cooke 1348962* 2013
Federal Communications Commission FCC 16-158
57
33245 Texoma Community Center – Cooke 1348964* 2013
33245 Texoma Community Center – Cooke 1348967* 2013
33245 Texoma Community Center – Cooke 1348968* 2013
33245 Texoma Community Center – Cooke 1348970* 2013
33245 Texoma Community Center – Cooke 1348976* 2013
33245 Texoma Community Center – Cooke 1348981* 2013
33245 Texoma Community Center – Cooke 1464295* 2014
33245 Texoma Community Center – Cooke 1465177* 2014
33245 Texoma Community Center – Cooke 1465180* 2014
33245 Texoma Community Center – Cooke 1465181* 2014
33245 Texoma Community Center – Cooke 1465182* 2014
33245 Texoma Community Center – Cooke 1465184* 2014
33245 Texoma Community Center – Cooke 1465460* 2014
33245 Texoma Community Center – Cooke 1465462* 2014
33245 Texoma Community Center – Cooke 1465468* 2014
33245 Texoma Community Center – Cooke 1465471* 2014
33245 Texoma Community Center – Cooke 1435473* 2014
33245 Texoma Community Center – Cooke 1465479* 2014
Federal Communications Commission FCC 16-158
58
33245 Texoma Community Center – Cooke 1465480* 2014
33245 Texoma Community Center – Cooke 1465482* 2014
33245 Texoma Community Center – Cooke 1465484* 2014
33245 Texoma Community Center – Cooke 1465486* 2014
33245 Texoma Community Center – Cooke 1465487* 2014
33245 Texoma Community Center – Cooke 1465524* 2014
33245 Texoma Community Center – Cooke 1465525* 2014
33245 Texoma Community Center – Cooke 1465527* 2014
33245 Texoma Community Center – Cooke 1465530* 2014
33245 Texoma Community Center – Cooke 1465531* 2014
33245 Texoma Community Center – Cooke 1465533* 2014
33245 Texoma Community Center – Cooke 1465536* 2014
33245 Texoma Community Center – Cooke 1465538* 2014
33245 Texoma Community Center – Cooke 1465545 2014
33245 Texoma Community Center – Cooke 1465547* 2014
33245 Texoma Community Center – Cooke 1567660* 2015
33245 Texoma Community Center – Cooke 1568156* 2015
33245 Texoma Community Center – Cooke 1568161* 2015
Federal Communications Commission FCC 16-158
59
33245 Texoma Community Center – Cooke 1568162* 2015
33245 Texoma Community Center – Cooke 1568163* 2015
33245 Texoma Community Center – Cooke 1568164* 2015
33245 Texoma Community Center – Cooke 1568165* 2015
33245 Texoma Community Center – Cooke 1568166* 2015
33245 Texoma Community Center – Cooke 1568167* 2015
33245 Texoma Community Center – Cooke 1568168* 2015
33245 Texoma Community Center – Cooke 1568169* 2015
33245 Texoma Community Center – Cooke 1568170* 2015
33245 Texoma Community Center – Cooke 1568171* 2015
33245 Texoma Community Center – Cooke 1568172* 2015
33245 Texoma Community Center – Cooke 1568173* 2015
33245 Texoma Community Center – Cooke 1568174* 2015
33245 Texoma Community Center – Cooke 1568176* 2015
33245 Texoma Community Center – Cooke 1568177* 2015
33245 Texoma Community Center – Cooke 1568178* 2015
33245 Texoma Community Center – Cooke 1568179* 2015
33245 Texoma Community Center – Cooke 1568180* 2015
Federal Communications Commission FCC 16-158
60
33245 Texoma Community Center – Cooke 1568181* 2015
33245 Texoma Community Center – Cooke 1568183* 2015
33245 Texoma Community Center – Cooke 1568184* 2015
33245 Texoma Community Center – Cooke 1568185* 2015
33245 Texoma Community Center – Cooke 1568186* 2015
33245 Texoma Community Center – Cooke 1568190 2015
37604 Coastal Family Health Center - Vancleave 1463754 2014
37604 Coastal Family Health Center - Vancleave 1463769 2014
37604 Coastal Family Health Center - Vancleave 1463773 2014
37604 Coastal Family Health Center - Vancleave 1463777 2014
37604 Coastal Family Health Center - Vancleave 1463780 2014
37604 Coastal Family Health Center - Vancleave 1463784 2014
37604 Coastal Family Health Center - Vancleave 1463786 2014
37604 Coastal Family Health Center - Vancleave 1463789 2014
37604 Coastal Family Health Center - Vancleave 1463811 2014
37604 Coastal Family Health Center - Vancleave 1463812 2014
37604 Coastal Family Health Center - Vancleave 1463817 2014
37604 Coastal Family Health Center - Vancleave 1570849 2015
Federal Communications Commission FCC 16-158
61
37604 Coastal Family Health Center - Vancleave 1570852 2015
37604 Coastal Family Health Center - Vancleave 1570853 2015
37604 Coastal Family Health Center - Vancleave 1570854 2015
37604 Coastal Family Health Center - Vancleave 1570855 2015
37604 Coastal Family Health Center - Vancleave 1570856 2015
37604 Coastal Family Health Center - Vancleave 1570857 2015
37604 Coastal Family Health Center - Vancleave 1570858 2015
37604 Coastal Family Health Center - Vancleave 1570859 2015
37604 Coastal Family Health Center - Vancleave 1570860 2015
37604 Coastal Family Health Center - Vancleave 1570861 2015
39286 El Futuro, Inc.--Siler City 1464330 2014
39286 El Futuro, Inc.--Siler City 1570415 2015
39710 Cheaha Regional Mental Health Center - Sylacauga 1569846 2015
39712 Cheaha Regional Mental Health Center - Talladega 1569843 2015
39713 Cheaha Regional Mental Health Center - Clay 1570290 2015
39714 Cheaha Regional Mental Health Center - Roanoke 1570282 2015
* Indicates Form 466s charged in support of apparent competitive bidding violations.
Federal Communications Commission FCC 16-158
62
APPENDIX C
FORM 466s SUPPORTED BY APPARENTLY FALSE $138.00 RATE DOCUMENTS
HCP
Number
HCP Name FRN FY
10254 Northeastern Rural Health Clinics, Inc. 1465189 2014
10254 Northeastern Rural Health Clinics, Inc. 1569144 2015
10256 Mountain Valleys Health Centers, Big Valley Health
Center
1465638 2014
10256 Mountain Valleys Health Centers, Big Valley Health
Center
1570623 2015
10256 Mountain Valleys Health Centers, Big Valley Health
Center
1570624 2015
10795 East Central Mississippi Health Care - Sebastopol
Medical Clinic
1455924 2014
10795 East Central Mississippi Health Care - Sebastopol
Medical Clinic
1455927 2014
10795 East Central Mississippi Health Care - Sebastopol
Medical Clinic
1455929 2014
11142 Mitchell County Hospital 1449767 2014
11852 Mountain Valleys Health Centers, Butte Valley Health
Center
1570625 2015
11856 Childress Regional Medical Center 1449144 2014
12791 South Sunflower County Hospital 1449025 2014
12791 South Sunflower County Hospital 1449153 2014
12816 IHSCAL Toiyabe 1574163 2015
13498 Bond County Health Department 1568203 2015
Federal Communications Commission FCC 16-158
63
13965 Burney Health Center 1570621 2015
14347 East Carroll Parish Hospital 1465999 2014
15570 Jeff Davis Hospital 1568145 2015
15925 Monroe County Hospital 1576349 2015
16153 Electra Memorial Hospital 1450662 2014
16394 Rush Foundation Hospital-Rush Medical Clinic 1343269 2013
16415 Hardy Wilson Memorial Hospital 1466623 2014
16667 Iraan General Hospital 1449753 2014
16667 Iraan General Hospital 1570993 2015
17021 Mountain Valleys Health Centers, Tulelake Health
Center
1570626 2015
17728 Fall River Valley Health Center 1570622 2015
22207 Community Counseling Services, Inc.-Malvern 1467123 2014
22207 Community Counseling Services, Inc.-Malvern 1467125 2014
22207 Community Counseling Services, Inc.-Malvern 1467126 2014
22207 Community Counseling Services, Inc.-Malvern 1567956 2015
22207 Community Counseling Services, Inc.-Malvern 1567957 2015
22207 Community Counseling Services, Inc.-Malvern 1567958 2015
24921 Hood Memorial Hospital 1466841 2014
Federal Communications Commission FCC 16-158
64
26203 North Runnels County Hospital District dba North
Runnels Hospital
1466656 2014
26203 North Runnels County Hospital District dba North
Runnels Hospital
1570936 2015
26967 Weems Mental Health Center - Clarke County 1462363 2014
26969 Weems Mental Health Center - Kemper County 1462366 2014
26970 Weems Mental Health Center - Leake County 1462371 2014
26971 Weems Mental Health Center - Neshoba County 1462373 2014
26973 Weems Mental Health Center - Scott County 1462379 2014
26974 Weems Mental Health Center - Smith County 1462341 2014
27109 Quinco Mental Health Bolivar Facility 1465431 2014
27135 Quinco Mental Health Centers Henderson Facility 1465179 2014
27157 Quinco Mental Health Lexington Facility 1465429 2014
27229 Quinco Mental Health Centers Savannah Facility 1465426 2014
27230 Quinco Mental Health Centers Selmer Facility 1465425 2014
27665 McDuffie Regional Medical Center 1450493 2014
27665 McDuffie Regional Medical Center 1450495 2014
31331 St. Genevieve County Memorial Hospital - Pointe
Bassee Family
1452625 2014
32862 Communicare Oxford 1461380 2014
32862 Communicare Oxford 1461382 2014
Federal Communications Commission FCC 16-158
65
32906 Rush Health Systems - John C Stennis Memorial
Hospital
1343287 2013
33245 Texoma Community Center – Cooke 1348862 2013
33245 Texoma Community Center – Cooke 1465545 2014
33245 Texoma Community Center – Cooke 1568190 2015
37604 Coastal Family Health Center - Vancleave 1463754 2014
37604 Coastal Family Health Center - Vancleave 1463769 2014
37604 Coastal Family Health Center - Vancleave 1463773 2014
37604 Coastal Family Health Center - Vancleave 1463777 2014
37604 Coastal Family Health Center - Vancleave 1463780 2014
37604 Coastal Family Health Center - Vancleave 1463784 2014
37604 Coastal Family Health Center - Vancleave 1463786 2014
37604 Coastal Family Health Center - Vancleave 1463789 2014
37604 Coastal Family Health Center - Vancleave 1463811 2014
37604 Coastal Family Health Center - Vancleave 1463812 2014
37604 Coastal Family Health Center - Vancleave 1463817 2014
37604 Coastal Family Health Center - Vancleave 1570849 2015
37604 Coastal Family Health Center - Vancleave 1570852 2015
37604 Coastal Family Health Center - Vancleave 1570853 2015
Federal Communications Commission FCC 16-158
66
37604 Coastal Family Health Center - Vancleave 1570854 2015
37604 Coastal Family Health Center - Vancleave 1570855 2015
37604 Coastal Family Health Center - Vancleave 1570856 2015
37604 Coastal Family Health Center - Vancleave 1570857 2015
37604 Coastal Family Health Center - Vancleave 1570858 2015
37604 Coastal Family Health Center - Vancleave 1570859 2015
37604 Coastal Family Health Center - Vancleave 1570860 2015
37604 Coastal Family Health Center - Vancleave 1570861 2015
39286 El Futuro, Inc.--Siler City 1464330 2014
39286 El Futuro, Inc.--Siler City 1570415 2015
39710 Cheaha Regional Mental Health Center - Sylacauga 1569846 2015
39712 Cheaha Regional Mental Health Center - Talladega 1569843 2015
39713 Cheaha Regional Mental Health Center - Clay 1570290 2015
39714 Cheaha Regional Mental Health Center - Roanoke 1570282 2015
Federal Communications Commission FCC 16-158
67
APPENDIX D
FORM 466s SUPPORTED BY APPARENTLY FORGED COMCAST RATE DOCUMENTS
HCP
Number
HCP Name
FY
FRN
Description
of the Wire
Approximate
Wire Date
Approximate
Wire
Payment Date
From USAC
to NSS
12791 South Sunflower
County Hospital
2012 1224839 Submission of
Apparently
Forged Urban
Rate to USAC
via Web Portal
June 10, 2013
and
January 24,
2014
February 21,
2014
12791 South Sunflower
County Hospital
2013 1338163 Submission of
Apparently
Forged Urban
Rate to USAC
via Web Portal
February 1,
2014
July 7, 2014
15801 Forrest General
Hospital/Marion
General Hospital
2012 1226735 Submission of
Apparently
Forged Urban
Rate to USAC
via Web Portal
June 22, 2013 December 20,
2013
16415 Hardy Wilson
Memorial Hospital
2013 1347127 Submission of
Apparently
Forged Urban
Rate to USAC
via Web Portal
June 20, 2014 November 6,
2015*
* Indicates wire charged in support of apparent wire fraud violation.
Federal Communications Commission FCC 16-158
68
APPENDIX E
APPARENTLY FORGED URBAN RATE DOCMENT SUBMITTED TO USAC BY HCP SOUTH
SUNFLOWER ON JUNE 10, 2013
Federal Communications Commission FCC 16-158
69
APPENDIX F
APPARENTLY FORGED URBAN RATE DOCUMENT BACKDATED BY NSS AND
SUBMITTED TO USAC BY HCP SOUTH SUNFLOWER ON JANUARY 24, 2014
Federal Communications Commission FCC 16-158
70
APPENDIX G
EMAIL FROM NSS EMPLOYEE TO SCOTT MADISON ATTACHING APPARENTLY
BACKDATED AND FORGED URBAN RATE DOCUMENTS AT HIS REQUEST
Federal Communications Commission FCC 16-158
71
STATEMENT OF COMMISSIONER AJIT PAI,
APPROVING IN PART AND DISSENTING IN PART
Re: Network Services Solutions, LLC, Scott Madison, File No.: EB-IHD-15-0001913.
Fabricating documents.1 Doctoring evidence to conceal unfair bidding practices.2 Offering a
“bribe in order to get the customer to sign.”3 Fixing competitive bidding processes to boost federal
subsidies.4 These are things Network Services Solutions (NSS) allegedly did in what appears to be an
ongoing criminal enterprise designed to rob taxpayers of millions of dollars through the Universal Service
Fund’s rural healthcare program.
I agree completely with my colleagues that it appears that NSS willfully and repeatedly violated
our rules and that we must recover the taxpayer funds that NSS unlawfully siphoned.
I also agree that NSS should be barred from getting any further federal subsidies from the
Universal Service Fund. Indeed, I was distressed that the Chairman’s initial draft would have allowed
NSS to continue to profit from its apparently fraudulent activities. I’m accordingly grateful to my
colleagues for supporting my call to turn off the spigot.5
And I agree with my colleagues that NSS’s conduct merits a hefty fine. But the NAL fatally
compromises our ability to impose a lawful forfeiture of more than $189,361 upon the carrier.6
Specifically, the NAL ties the proposed forfeiture to forms submitted on or before June 30, 20157—which
is at least 127 days beyond the Act’s one-year statute of limitations.8 It then claims NSS’s “apparent
violations . . . continued through the present as a result of NSS’s failure to take actions that would have
corrected the forms that were filed in connection with these activities.”9
This legal theory cannot be right. For one, it “stretches the concept of a continuing violation past
the breaking point.”10 For example, under this theory, the statute-of-limitations clock might never
commence for an inaccurately filed form and the Commission could issue forfeitures for conduct that
1 See NAL at paras. 74–78.
2 See NAL at paras. 38–44.
3 See NAL at para. 48 (quoting Email from , Billing Manager, NSS, to Scott Madison, President,
NSS, and , Controller/Office Manager, FW: Sales Order – Texoma – Network Services Signed Service
Agreements (Nov. 25, 2013, 5:59 p m.)).
4 See NAL at paras. 55–69.
5 See NAL at paras. 146–47.
6 I agree with the proposed forfeiture of $189,361 for the one count of wire fraud within the Act’s one-year statute of
limitations. See NAL at para. 141.
7 See NAL at paras. 133–40 (relying on 175 Forms 466, the most recent of which appears to have been submitted on
June 30, 2015).
8 Communications Act § 503(b)(6)(B) (“No forfeiture penalty shall be determined or imposed against any person
under this subsection if . . . the violation charged occurred more than 1 year prior to the date of the issues of the
required . . . notice of apparent liability.”).
9 NAL at para. 129.
10 See BellSouth Telecommunications, LLC, d/b/a AT&T Southeast, File No.: EB-IHD-14-00017954, NAL/Acct.
No.: 201632080007, Notice of Apparent Liability for Forfeiture, 31 FCC Rcd 8501, 8528–29 (2016) (Dissenting
Statement of Commissioner Ajit Pai) (quoting Intelsat License LLC f/k/a Intelsat North America, LLC, File No. EB-
11-IH-1376; NAL/Acct. No. 201432080001; FRN 0009308008, Notice of Apparent Liability, 28 FCC Rcd 17183,
17194 (2013) (Statement of Commissioner Ajit Pai, Dissenting)).
Federal Communications Commission FCC 16-158
72
occurred more than a decade ago. For another, NSS did not sign, certify, nor even submit the forms at
issue here.11 I cannot discern any rule, any precedent, or any legal theory (nor does the NAL proffer one)
that imposes the continuing obligation that the NAL seems to contemplate.12
For what it’s worth, we easily could have avoided this legal pitfall. Over the last year, NSS itself
submitted 463 separate requests for payment in connection with its apparently illegal activities.13 I
accordingly proposed to my colleagues to rely on these submissions for our forfeiture calculation—an
approach that was on solid legal footing and that could have sustained an even larger forfeiture. But as
happens all too often at this agency, my efforts at compromise were rebuffed.
For these reasons, I must dissent in part.
11 Instead, it appears NSS’s customers signed, certified, and submitted these forms as required by our rules.
12 Notably, the NAL cites instances in which the FCC hypothesized a continuing obligation on carriers to correct
forms they signed and submitted, NAL at note 321, but not one where the obligation was to correct a form submitted
by another entity.
13 The first such request was filed November 4, 2015, for funding request number (FRN) 14666561 and the last such
set of requests was filed July 1, 2016 for the following FRNs: 15676601, 15679561, 15679571, 15679581,
15681561, 15681611, 15681621, 15681631, 15681641, 15681651, 15681661, 15681671, 15681681, 15681691,
15681701, 15681711, 15681731, 15681741, 15681761, 15681771, 15681781, 15681791, 15681801, 15681811,
15681831, 15681841, 15681851, 15681861, 15681901, 15682031, 15691441, 15698431, 15698461, 15702821,
15702901, 15704151, 15706211, 15706221, 15706231, 15706241, 15706251, 15706261, 15708521, 15708531,
15708541, 15708551, 15708561, 15708571, 15708581, 15708591, 15708601, 15708611, 15709361, 15709931,
15741631.