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 Federal Communications Commission FCC 16-165 
 
Before the 
Federal Communications Commission 
Washington, D.C. 20554 
 
 
In the Matter of 
 
Sandwich Isles Communications, Inc., 
Waimana Enterprises, Inc., 
Albert S.N. Hee 
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) 
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File No.:  EB-IHD-15-00019603 
NAL/Acct. No.: 201732080004 
FRN: 0001514090 
 
NOTICE OF APPARENT LIABILITY FOR FORFEITURE AND ORDER 
 
Adopted:  December 5, 2016 Released:  December 5, 2016 
 
By the Commission: Commissioner O’Rielly approving in part and concurring in part.  
 
Heading Paragraph # 
I.  INTRODUCTION .................................................................................................................................. 1 
II.  BACKGROUND .................................................................................................................................... 4 
A.  Regulatory Framework of the High Cost Program/Connect America Fund .................................... 4 
B.  Relevant Entities and Persons ........................................................................................................ 10 
C.  Albert Hee’s Criminal Tax Fraud Conviction................................................................................ 19 
III. USAC INVESTIGATION ................................................................................................................... 29 
A.  USAC Investigation of SIC’s Practices Regarding its Category 1 Cable and Wire 
Facilities ......................................................................................................................................... 32 
B.  USAC Investigation of SIC’s Practices Related to Lease of Abandoned Water Mains ................ 37 
C.  USAC Investigation into Regulated Expenses and a Bonus Payment to Owner ........................... 40 
D.  USAC Investigation of Other Issues .............................................................................................. 43 
IV. DISCUSSION ...................................................................................................................................... 46 
A.  SIC Received More High Cost Support than it was Entitled to by Apparently Violating 
the Act and the Commission’s Rules ............................................................................................. 49 
(1) SIC Misclassified its Category 1 C&WF ................................................................................. 49 
(2) SIC Overstated Costs Relating to the Lease of Abandoned Water Mains ............................... 56 
B.  SIC Received More Support than it was Entitled to Under Program Rules .................................. 60 
C.  Joint and Several Liability of SIC, Waimana, and Albert Hee ...................................................... 69 
V.  PROPOSED FORFEITURE ................................................................................................................ 78 
  A.   Proposed Forfeiture Penalty for Failing to Keep Accounts, Records, and Memoranda in     
             the Manner Prescribed by the Commission ................................................................................... 80 
VI. ORDERING CLAUSES ....................................................................................................................... 85 
 
 
I. INTRODUCTION 
1. Congress has directed the Commission to ensure that “[c]onsumers in all regions of the 
Nation, including low-income consumers and those in rural, insular and high cost areas . . . have access to 
 Federal Communications Commission FCC 16-165   
 2
rates charged for similar services in urban areas.”1  The Commission has four universal service programs, 
one of which is the federal high-cost program (also known as the Connect America Fund).2  Within the 
high-cost program, rate-of-return companies receive high-cost universal service support to help defray the 
costs for building and maintaining telecommunications plant from the local telephone central offices to 
customer premises where those costs are particularly high, as in rural areas.3  To fund these universal 
support mechanisms, telecommunications carriers are required to contribute, on an equitable and 
nondiscriminatory basis, to the Universal Service Fund (USF or the Fund).4  The Commission has an 
ongoing obligation to use universal service funds efficiently and to protect the Fund from waste, fraud 
and abuse.  Parties that defraud or otherwise harm the high-cost program not only deprive the Fund  of 
much-needed funds, but also potentially harm residents in high-cost areas, who may not have access to 
modern networks.  In this Notice of Apparent Liability for Forfeiture (NAL), we continue our 
commitment to fight waste, fraud and abuse in the USF. 
2. We find that Sandwich Isles Communications, Inc. (SIC), apparently violated Section 220 
of the Communications Act of 1934, as amended (the Act), by failing to keep its accounts, records, and 
memoranda in the manner prescribed by the Commission under its rules (Rules)5 and apparently violated 
Sections 69.601(c) and 69.605(a) of the Commission’s Rules by submitting and certifying inaccurate data 
submitted in annual cost studies for cost study years 2002 through 2013 that were used in the calculation 
of the federal high-cost program.  In a companion order, Sandwich Isles Communications, Inc., WC 
Docket No. 10-90, Order, FCC 16-167 (2016) (2016 SIC Order), the Commission also finds that SIC 
failed to comply with the Commission’s Rules by using high-cost support for purposes other than “the 
provision, maintenance, and upgrading of facilities and services for which the support is intended.”6  
3. Based upon on our independent review of the facts and circumstances of this case, as well 
as an investigation conducted by the Universal Service Administrative Company (USAC),7 the 
Commission finds in the 2016 SIC Order that SIC misclassified costs relating to its cable and wire 
facilities, overstated the costs related to the lease of abandoned water mains from its affiliate, and, as a 
result, received improper payments of more than $27 million from the Fund’s high-cost program.8  
Although we find repeated violations of our Rules over a number of years, as discussed below, we 
specifically find, pursuant to Section 220(d) of the Act and Section 1.80(c) of our Rules, that SIC, 
Waimana Enterprises, Inc. (Waimana) and Albert S.N. Hee are apparently jointly and severally liable for 
a proposed forfeiture penalty in the amount of $49,598,448 based upon violations related to cost study 
                                                     
1 47 U.S.C. § 254(b). 
2 47 U.S.C. § 254(e)(3). 
3 47 U.S.C. § 254(e); 47 CFR § 54.7.  Prior to the Telecommunications Act of 1996 (the ’96 Act), support was 
provided through implicit subsidies between carriers.  After the Commission implemented the universal service 
provisions of the ‘96 Act, support was provided through explicit payments from the Fund.  See generally Universal 
Service First Report and Order. 
4 47 U.S.C. § 254(d). Carriers generally pass on their contributions to the Fund to their customers as a charge on 
customer bills. 
5 Pursuant to Section 220, the Commission may, “prescribe the forms of any and all accounts, records, and 
memoranda to be kept by carriers . . . including the accounts, records, and memoranda of the movement of traffic, as 
well as of the receipts and expenditures of moneys” and “shall require that each common carrier shall maintain a 
system of accounting methods, procedures, and techniques . . . which shall ensure a proper allocation of all costs to 
and among telecommunications services, facilities, and products....”  47 U.S.C. § 220(a)(1), (a)(2). 
6 See 47 CFR § 54.7. 
7 USAC’s report is hereby incorporated by reference in this NAL.  Memorandum to FCC from USAC, Investigation 
of Sandwich Isles Communications, Inc., dated May 13, 2016 (USAC Report). 
8 2016 SIC Order at 17-18, para. 57. 
 Federal Communications Commission FCC 16-165   
 3
years 2010, 2011, 2012, and 2013.  The proposed forfeiture reflects the gravity of apparently persistent 
misconduct and furthers the Commission’s goals of ensuring accountability for past conduct, deterring 
future violations by carriers, and promoting compliance with our Rules.  
II. BACKGROUND    
A. Regulatory Framework of the High Cost Program/Connect America Fund 
4. As we noted above, the federal high-cost program is designed to ensure that consumers in 
rural, insular, and high-cost areas have access to modern communications networks capable of providing 
voice and broadband service, both fixed and mobile, at rates that are reasonably comparable to those in 
urban areas.9  The local exchange telephone industry is primarily characterized as an industry with large, 
fixed capital investments that represent a high percentage of total costs.  Historically, the Commission has 
recognized that incumbent telephone companies experience large amounts of capital investment cost and 
in some areas cannot recover all of their costs from end user rates.10  The high-cost program allows 
eligible telecommunications carriers (ETCs) that serve high-cost areas to recover some of their costs from 
the Fund.  In evaluating whether particular costs can be included in a carrier’s revenue requirement,  the 
Commission allows recovery through regulated rates only when a cost is “used and useful” in the 
provision of regulated services; specifically, only if it is “necessary to the efficient conduct of a utility’s 
business, presently or within a reasonable future period.”11  The Commission has held that “imprudent or 
excessive investment, for example, is the responsibility and coincident burden of the investor, not the 
ratepayer.”12 
5.  Part 54 contains Rules governing the federal universal service programs, including the 
high-cost support mechanism.13  USAC, as the administrator of the federal universal service support 
mechanisms, collects and distributes universal service funds.14   Under the high-cost program, high-cost 
loop support (HCLS) provides support for some loop costs that otherwise would be recovered in the 
intrastate jurisdiction, while interstate common line support (ICLS) provides support for that portion of 
the interstate common line revenue requirement that is not recovered from end users through subscriber 
line charges.  Carriers may use support only for the “provision, maintenance, and upgrading of facilities 
for which the support is intended.”15 
6.  In the USF/ICC Transformation Order, the Commission comprehensively reformed 
universal service funding for high-cost, rural areas, adopting fiscally responsible, accountable, incentive-
based policies to preserve and advance voice and broadband service while ensuring fairness for 
                                                     
9 Congress created the federal universal service mechanisms to ensure, among other things, that “consumers in all 
regions of the Nation, including . . . consumers . . . in rural, insular, and high cost areas . . . should have access to 
telecommunications and information services . . . that are reasonably comparable to those services provided in urban 
areas” and at reasonably comparably rates. 47 U.S.C. § 254(b).  See Connect America Fund et al., WC Docket No. 
10-90 et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663 (2011), aff’d sub 
nom In re: FCC 11-161, 753 F.3d 1015 (10th Cir. 2014) (USF/ICC Transformation Order). 
10 See Moultrie Independent Telephone Company et al., Order, 16 FCC Rcd 18242, 18247, para. 11 (2001). 
11 American Tel and Tel. Co., Phase II Final Decision and Order, 64 FCC 2d 1, at 38, para. 111 (1977). 
12 Id. at para. 112. 
13 See 47 CFR Part 54. 
14  See 47 CFR §§ 54.701(a), 702(b). 
15 47 CFR § 54.7; see also 47 U.S.C. § 254(e). 
 Federal Communications Commission FCC 16-165   
 4
consumers who pay into the Fund.16  The Commission did not fundamentally alter the major support 
mechanisms in place for rate-of-return carriers at the time, specifically HCLS and ICLS.17 
7. Smaller incumbent local exchange carriers (LECs) operate under rate-of-return regulation 
at the federal level and currently receive high-cost support based on their historical costs.18  Rate-of-return 
companies must comply with the Commission’s Rules, including Parts 32, 36, 54, 64, and 69.19  The 
Uniform System of Accounts (Part 32) are accounting rules specifically tailored to the 
telecommunications industry that require carriers to maintain certain cost and revenue accounts.20  Rate-
of-return carriers must directly assign or allocate investments, expenses, and revenues between regulated 
and nonregulated activities using the rules contained in Part 64 (Cost Allocations).21  The regulated 
investments, expenses and revenue are then separated between the intrastate and interstate jurisdictions in 
accordance with Part 36 (Jurisdictional Separations).22   
8. Separations are intended to apportion costs among categories or jurisdictions by actual use 
or by direct assignment.23  Under the Commission’s Rules, telecommunications property includes, but is 
not limited to, “telecommunications plant in service,” general support facilities, central office24 
                                                     
16 See generally USF/ICC Transformation Order, 26 FCC Rcd 17663 (2011). 
17 47 CFR § 54.302; USF/ICC Transformation Order, 26 FCC Rcd at 17765, para. 274 (adopting Section 54.302).    
Among other things, the Commission adopted a new rule that established a $250 per line per month cap on high-cost 
support, exclusive of Connect America Fund Intercarrier Compensation Replacement support ($250 cap). 
18 Cost companies receive compensation for the use of their facilities in originating and terminating interstate 
services on the basis of their actual interstate costs for performing those functions.  In connection with high-cost 
support, cost companies receive support based on information contained in their cost studies.  Average schedule 
companies receive support based on formulas that use the reported costs of the cost companies.  The Commission 
recently amended its Rules to provide rate-of-return carriers with the option of electing to receive Connect America 
support based on a forward-looking cost model.  See Connect America Fund et al., Report and Order, Order and 
Order on Reconsideration, and Further Notice of Proposed Rulemaking, 31 FCC Rcd 3087, 3096-97, para. 20 (2016) 
(Rate-of-Return Reform Order).  SIC is a rate-of-return carrier. 
19 See 47 CFR Parts 32, 36, 54, 64, and 69. 
20 Part 32 specifies the asset, liability, equity, revenue and expense accounts that must be maintained to record 
amounts for preparation of a carrier’s financial statements for its regulated and nonregulated activities.  See, e.g., 47 
CFR §§ 32.14, 32.23.    
21 47 CFR §§ 64.901–.904.  Specifically, when a carrier subject to the Act uses the same facilities to provide both 
telephony service and a nonregulated service such as cable, the carrier must allocate the costs of such facilities 
between these services.  See also 47 CFR § 32.14(a) (providing that “regulated accounts shall be interpreted to 
include the investments, revenues and expenses associated with those telecommunications products and services to 
which the tariff filing requirements contained in Title II of the Communications Act of 1934 . . . are applied”); 47 
CFR § 32.23 (describing nonregulated activities).  
22 See 47 CFR Part 36.  The separations procedures set forth in Part 36 are designed primarily for the allocation of 
property costs, revenues, expenses, taxes and reserves between state and interstate jurisdictions.  See 47 CFR § 
36.1(b).  The jurisdictional separations process begins with the Uniform System of Accounts, Part 32 of the 
Commission’s Rules.  See 47 CFR § 36.1(f).  For purposes of jurisdictional separation, “the Commission 
distinguishes traffic sensitive costs from non-traffic sensitive costs….  [T]hese terms refer respectively to exchange 
company costs that vary with the extent of phone usage and those that do not.”  City of Brookings Municipal 
Telephone Co. v. FCC, 822 F.2d 1153, 1156 (D.C. Cir. 1987). 
23 47 CFR § 36.2(a)(1).  
24 See Appendix to Part 36 (providing that, a central office is “a switching unit, in a telephone system which 
provides service to the general public, having the necessary equipment and operations arrangements for terminating 
and interconnecting subscriber lines and trunks or trunks only”). 
 Federal Communications Commission FCC 16-165   
 5
equipment, and cable and wire facilities (C&WF).25  “The fundamental basis on which separations are 
made is the use of telecommunications plant in each of the operations,”26 and telecommunications plant, 
“in general, is segregable into two broad classifications, namely, (i) interexchange plant, which is plant 
used primarily to furnish toll services, and (ii) exchange plant, which is plant used primarily to furnish 
local services.”27  Additionally, Sections 36.151 – 36.157 explain the separations procedures for C&WF.  
Under the Commission’s Rules, C&WF “are basically divided between exchange and interexchange.”28  
Section 36.151(c) explains that “[i]n the separation of the cost of cable and wireless among its operations 
the first step is the assignment of the facilities to certain categories.”29  Category 1 C&WF (Exchange 
Line C&W Excluding Wideband) includes facilities between local central offices and subscriber premises 
used for, among other things, message telephone, private line and local channels,30 and Category 3 
consists of Interexchange C&WF and are facilities used for “message toll and toll private line services.”31  
Section 36.156(b) provides that the cost of Category 3 C&WF shall be directly assigned, where feasible.32   
Our Rules allow for an expense adjustment,33 and “[i]n order to allow determination of the study areas 
and wire centers that are entitled to an expense adjustment” each LEC must provide the National 
Exchange Carrier Association (NECA) 34 “with the information listed for each study area in which such 
incumbent LEC operates.”35 
                                                     
25 47 CFR § 36.101. 
26 47 CFR § 36.1(c). 
27 47 CFR § 36.2(b)(1). 
28 47 CFR § 36.152(a). 
29 47 CFR § 36.151(c); see 47 CFR § 36.152(a)-(c) (explaining the four categories of C&WF). 
30 47 CFR § 36.152(a)(1).  C&WF “are basically divided between exchange and interexchange.”  47 CFR § 
36.152(a).  Category 2 C&WF are Wideband and Exchange Trunk.  See 47 CFR § 36.152(a)(2).  Category 4 
includes Host/Remote Message C&WF.  See 47 CFR § 36.152(c).    
31 See 47 CFR § 36.152(b).  “It includes cable and wire facilities carrying intertoll circuits, tributary circuits, the 
interexchange channel portion of special service circuits, circuits between control terminals and radio stations used 
for overseas or coastal harbor service, interlocal trunks between offices in the different exchange or metropolitan 
service areas carrying only message toll traffic and certain tandem trunks which carry principally message toll 
traffic.”  Id. 
32 47 CFR § 36.156(b). 
33 Part 36 historically permitted carriers that serve high-cost areas to allocate additional local loop costs to the 
interstate jurisdiction through a so-called “Expense Adjustment” and to recover those costs through the high-cost 
loop support (HCLS) mechanism, thus making intrastate telephone service in high-cost areas more affordable. In 
2014, the relevant provisions contained in Part 36 were moved to Part 54 without substantive change.  The Expense 
Adjustment currently is codified at 47 CFR § 54.1310. 
34 NECA is an intra-industry, not-for-profit corporation charged with administering the Commission’s interstate 
access charge system and associated revenue pools.  See https://www.neca.org/About_Us.aspx (last visited July 25, 
2016).  Pursuant to the Commission’s Rules, NECA is responsible for, among other duties, collecting cost data, 
including revenue, expense, and investment data, from all pooling LECs to develop specific revenue requirements in 
order to recover incurred costs allocated to the interstate jurisdiction under the Commission’s jurisdictional Rules in 
47 CFR Part 36.  See 47 CFR § 69.601(a).  Carriers also provide operating data pertaining to working loops, 
exchange counts and non-traffic sensitive data to NECA.   
The NECA pool is an averaging mechanism to smooth out access rates for small carriers over a larger base of costs 
and revenues.  Small telephone companies are allowed to participate in the voluntary cost and revenue pools 
associated with the access tariff filed by NECA.  NECA calculates and files rates based on overall pool costs of 
small telephone companies, who in turn share in pool revenues in proportion to their costs.  See 47 CFR § 69.601. 
35 47 CFR § 54.1305; see 47 CFR §§ 54.1319 (providing for the calculation of loop cost), 54.1310 (providing for the 
calculation of expense adjustment). 



6
Federal Communications Commission FCC 16-165 
10
legitimate business expenses.75  The Indictment stated that, “the Defendant [Albert Hee] caused WEI to 
pay a total of $4,063,294.39 of his personal expenses” for the time period 2002 to 2012 for the benefit of 
Albert Hee’s children and many other services directly benefiting Albert Hee.  The four million dollars in 
personal expense payments, which Albert Hee did not report as income, resulted in personal federal taxes 
due and owed in the amount of $425,988.  On July 13, 2015, Albert Hee was convicted on all counts and 
on January 6, 2016, was sentenced to 46 months in federal prison.     
20. During the 11-day trial by jury, which began on June 23, 2015, the United States
presented overwhelming testimonial and documentary evidence that Albert Hee directed Waimana, as 
well as its subsidiaries, to pay personal expenses for the sole benefit of him and his family from 2002 
through 2013.  Among other witnesses, Nancy Henderson, Albert Hee’s personal assistant, and several 
accountants (who provided accounting services to Albert Hee, Waimana, and other affiliate companies) 
testified regarding the bookkeeping and accounting processes used at the direction of Albert Hee.   
21. Nancy Henderson, who reported directly to Albert Hee and had been employed at
Waimana for 15 years, testified that Albert Hee “had final authority on any decision” at Waimana.76  
Nancy Henderson explained that Albert Hee personally authorized and directed numerous expenses that 
were for the benefit of him and his family to be reimbursed or directly paid by Waimana.  Nancy 
Henderson further explained that Albert Hee, and no one else, requested and approved corporate checks 
to be issued for his personal expenses, and that the checks were often signed by Albert Hee, who 
maintained signatory authority over the companies’ accounts.77  Moreover, Albert Hee personally 
instructed Nancy Henderson on how to record and categorize the personal expenses and payments in 
Waimana’s books as business expenses incurred by Waimana or an affiliate company.78   
22. Several of Waimana’s accountants testified that they relied on Albert Hee and Waimana
“for the proper recording of transactions in the books of account” and “for the substantial accuracy of the 
financial records” in order to prepare the financial statements and tax returns for Waimana and its 
affiliated companies, including Sandwich Isles and ClearCom.79   
23. Testifying on his own behalf, Albert Hee asserted that he did not play a role in the
categorization of his personal expenses.  Notwithstanding his assertions, Albert Hee acknowledged, “I 
make a decision on what charges go to what company, whether there’s a business purpose, and then it’s 
dealt with by the accountants[.]”80 
24. Two of Albert Hee’s children, Adrianne. Hee and Charlton Hee, also corroborated Albert
Hee’s authority and control over Waimana, SIC and other affiliate companies during the period of 2002 
through 2012.  Although the Hee Children Trusts had significant ownership interests in several 
companies, both Adrianne Hee and Charlton Hee testified to having no role in the management of the 
companies during the aforementioned period.81  Rather, Adrianne Hee explained that she was enrolled as 
75 The Indictment further alleged that Albert Hee failed to report the receipt of the payments on his own tax returns, 
and as a result, Albert Hee unlawfully reduced his corporate and individual tax liability in violation of 26 U.S.C. § 
7206(1).  Second Superseding Indictment, United States v. Albert S.N. Hee, No. 14-cr-00826-SOM (D. Haw. June 
23, 2015) (ECF No. 55). 
76 Trial Tr. vol. 2, 47 and 51. 
77 See, e.g., Gov’t Ex. 4-101; Trial Tr. vol. 2, 54-58 (discussing payment of Albert Hee’s masseuse as “consulting 
services”). 
78 Id. 
79 See, e.g., Trial Tr. vol. 3, 8-9. 
80 Trial Tr. vol. 9, 194-195.  See also Trial Tr. vol. 10, 8. 
81 Breanne Hee-Kahalewai, Hee’s third adult child, returned to Hawaii in 2012 to work at SIC.  At the end of 2013, 
Breanne Hee-Kahalewai became the Director of Corporate Services at SIC and, beginning in or about 2013, joined 
the WEI Board of Directors.  See Trial Tr. vol. 9, 44.  Following Hee’s criminal conviction, as of August 26, 2015, 
(continued….) 
Federal Communications Commission FCC 16-165 
11
a full-time college student from fall 2004 to June 2009, a graduate student from September 2010 to June 
2013, and, during summer breaks, interned in various positions on the mainland and attended summer 
school programs.82  Adrianne Hee further conceded that she did not work at Waimana from July 1, 2010, 
through June 30, 2011, while enrolled in graduate school even though Waimana payroll records reflected 
otherwise and that, at the time of her testimony, she had been employed at other companies located on the 
mainland since approximately January 2014.83   
25. Charlton Hee similarly testified that he did not have a management role in the companies
affiliated with Waimana and, for most of the relevant period, was otherwise employed with third-party 
entities outside of Hawaii.  Charlton Hee testified that from the fall of 2008 to the spring of 2012, he was 
a college student on the mainland and after returning to Hawaii had made “art and sculpture” his 
“occupation.”84  Charlton Hee also testified regarding his limited, part-time employment at Waimana after 
returning from college in 2012.  Notably, Charlton Hee stated that his duties at Waimana were the same 
as in 2004, when he was in the ninth grade:  to work “on the weekends out at the Mililani property” 
driving the tractors to “cut grass.”85  Charlton Hee further testified that in December 2012, he worked full-
time for one or two months as a field technician installing telephone cables and emergency phone lines.86  
Charlton Hee also testified that at the time of the trial, he had been working for a Hawaii state agency for 
the past four months, while continuing to receive a salary from Waimana.87 
26. The prosecution provided evidence of numerous instances in which Albert Hee authorized
the use of corporate funds for his personal expenses.  For example, from at least 2003 through 2012, 
Albert Hee approved payments to his personal masseuse totaling more than $90,000 for personal 
massages and directed the payments to be recorded as “consulting services.”88  Albert Hee also directed 
Waimana and its affiliates to reimburse him for cash advances, meals and personal travel; the reimbursed 
expenses totaled at least $119,909.19, which included $55,232.23 for family vacations to France and 
Switzerland in 2008, Disneyworld in 2010, Tahiti in 2010, and the island of Hawaii in 2011.89       
27. The prosecution further provided evidence that Albert Hee directed the use of corporate
funds to benefit his family.  For instance, Albert Hee instructed Nancy Henderson to use company funds 
to make payments towards his three children’s undergraduate and graduate education expenses and 
directed the payments to be recorded in corporate accounts as “educational expenses.”90  Waimana paid at 
least $630,103.39 towards the education of Albert Hee’s children.91  In addition, Albert Hee directed 
(Continued from previous page)           
SIC informed the Commission that WEI Board of Directors was comprised of Albert Hee, Wendy R. Hee, Adrianne 
Hee, Breanne Hee-Kahalewai, and Charlton Hee.  See USAC Report at 20, Exh. B. 
82 Trial Tr. vol. 5, 12-25, 39-40.  Although Adrianne Hee testified in depth regarding the numerous summer 
employment positions she held on the mainland, her resume indicated that she was employed as a “workhand” for 
SIC during the summers of 2004-2008, see Trial Tr. vol. 5, 39-42, in which she “[o]perated heavy machinery, 
including bulldozers, tractors, and skid steer loaders, charged with the upkeep of a 3,000-square-foot nursery, and 
the implementation of an irrigation system.”  Trial Tr. vol. 5, 41. 
83 Trial Tr. vol. 5, 30-36; Gov’t Ex. 4-86. 
84 Trial Tr. vol. 4, 8, 29-30.  
85 Trial Tr. vol. 4, 31-32. 
86 Trial Tr. vol. 4, 31, 43. 
87 Trial Tr. vo. 4, 47-48. 
88 See, e.g., Gov’t Ex. 4-101; Trial Tr. vol. 2, 54-58 (discussing payment of Albert Hee’s masseuse as “consulting 
services”). 
89 Trial Tr. vol. 8, 186, 194, 197. 
90 Trial Tr. vol. 2, 62, 67, 71-72, 79; Gov’t Exs. 3-103, 3-104, 3-105, 3-106, 4-82L, 4-82P, 4-820. 
91 Gov’t Exs. 3-91 through 3-106, 4-82E through 4-82G, 4-82I, 4-82L, 4-82O, through 4-82Q. 
Federal Communications Commission FCC 16-165 
12
Waimana in 2008 to purchase a $43,000 SUV and a home in California for $1.3 million, using funds from 
Waimana and an affiliate company,92 near the university that two of Albert Hee’s children (Charlton Hee 
and Breanne Hee-Kahalewai) attended.93  While enrolled at the university, the two children lived in the 
home and used the SUV for their personal use.94 
28. The evidence presented at trial also demonstrated that Albert Hee instructed Nancy
Henderson to place his wife and children on Waimana’s payroll and dictated their salaries and benefits.95  
Although she received a full-time salary and benefits, Nancy Henderson testified that Wendy Hee was in 
the office only “occasionally” or “every couple of months” and saw Wendy Hee do work in the office 
only “one time.”96  Charlton Hee further testified that Wendy Hee “stayed at home” to care for the family 
from about 2001 through 2013.97  Similarly, Nancy Henderson and the Hee children testified that the Hee 
children received salaries and benefits from Waimana while attending school full-time on the mainland 
and while employed elsewhere.98  In fact, business records show that Wendy Hee and the children were 
paid a total of $1,680,685.92 in salary and benefits from 2002 through 2012.99 
III. USAC INVESTIGATION
29. On August 5, 2015, based in part on the government’s evidence at trial regarding the
breadth of personal expenditures by Albert Hee through the use of corporate entities, the Commission’s 
Wireline Competition Bureau (WCB) issued a memorandum to USAC, directing USAC’s Internal Audit 
Division (IAD) to investigate whether SIC received any improper payments from the federal high-cost 
support mechanism from 2002 to June 2015. 100  
30. The Bureau, in coordination with WCB and USAC, reviewed evidence derived from
Albert Hee’s criminal trial to assist in determining whether Albert Hee’s and Waimana’s conduct 
impacted SIC’s compliance with the Commission’s Rules.  From August 2015 through April 2016, 
USAC and Commission staff held weekly meetings by telephone with SIC to discuss inquiries and 
documentation needed for the investigation. USAC focused on SIC’s affiliated entities and transactions, 
SIC’s corporate structure, and testing of data submitted for high-cost purposes affecting disbursements 
between 2002 to June 2015.101  Throughout the examination, USAC made over 350 inquiries that resulted 
in SIC submitting over 3,200 files, thus extending its review beyond the criminal trial evidence.102  On 
February 5, 2016, USAC issued a preliminary report of the exceptions to the Commission’s Rules103 noted 
92 Gov’t Exs. 3-3, 4-82K, 4-100. 
93 Gov’t. Ex. 3-3, 4-100. 
94 See Trial Tr. vol. 4, 14, 20-25, 27-28. 
95 Trial Tr. vol. 2, 53, 73. 
96 Trial Tr. vol. 2, 52. 
97 Trial Tr. vol. 4, 34. 
98 Trial Tr. vol. 4, 28, 31, 33; Trial Tr. vol. 5, 16, 31-32. 
99 See, e.g., Gov’t Exs. 4-86 through 4-99. 
100 Among other things, WCB directed USAC to determine if there were sufficient assurances that future high-cost 
support amounts would be used consistent with the Commission’s Rules. 
101 USAC Report at 1. 
102 In its final report, USAC noted that SIC was responsive to most, but not all, of the requests for information.  See 
USAC Report at 1.  For example, USAC did not receive the financial information of affiliates to SIC, including 
those entities that had contractual relationships with SIC and receiving funds from SIC.  USAC also noted that 
because of time constraints, it focused on those matters with the largest impact to the Fund.  See USAC Report at 2.  
103 “Exceptions” to the Commission’s Rules used herein refers to apparent noncompliance with the Commission’s 
Rules or program procedures. 

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113  SIC responded that “
114
34. USAC determined that C&WF connecting central offices should not have been allocated
to Category 1.  USAC indicated that “facilities between central offices inherently cannot carry local 
traffic, as local traffic is exclusively between central office and subscriber premises.”115  Thus, USAC 
determined that SIC had classified certain interexchange C&WF as exchange C&WF in contravention of 
Section 36.152(a)(1), which provides that Category 1 facilities include facilities “between local central 
offices and subscriber premises.”116  USAC therefore removed the submitted costs from Category 1 and 
reassigned the costs under Section 36.152(b) of the Commission’s Rules.117  With the reassignment of 
costs, USAC determined that SIC had received improper payments from the Fund from at least 2005-
2015.118  In 2016 SIC Order released today, the Commission considers SIC’s allocation and concludes 
that SIC misclassified its facilities as Category 1 facilities.119 
35. With respect to the “other routes” discussed above, using maps and subscriber data
provided by SIC, USAC focused on whether the facilities classified as Category 1 actually served 
subscriber premises, as required under Section 36.152(a)(1).120  In its preliminary report, based on the 
facilities route maps and SIC’s subscriber data, USAC identified multiple routes that were not served 
during certain years, i.e., facilities that did not connect to subscriber premises.  In response, SIC provided 
additional information to USAC, including a listing indicating which C&WF route serviced which 
exchange.  SIC also conceded that subscribers were not served for two separate routes.121  USAC also 
reviewed SIC’s cost studies to determine which exchanges were listed as serving active subcategory 1.3 
loops122 each year between 2002 and 2013.  Based on SIC’s admissions and data submissions, USAC 
determined in its final report that SIC had submitted Category 1 C&WF costs for facilities that did not 
actually serve any subscriber premises from at least 2004 through 2013. Thus, USAC determined that SIC 
had received improper payments from the Fund based on its misclassification of C&WF that did not 
actually serve end-user subscriber premises.  Additionally, in the companion order to this NAL, the 
Commission finds that SIC’s allocation methodology resulted in substantial C&WF costs being allocated 
to Category 1 even though the facilities did not directly connect local central offices and subscriber 
premises.123 
113 USAC Report at 9. 
114 USAC Report at 10.  
115 USAC Report at 13. 
116 See USAC Report at 7, 13; 47 CFR § 36.152(a)(1). 
117 Id. 
118 USAC Report at 15. 
119 The Commission concludes, after reviewing the data submitted by Sandwich Isles, that facilities used for the 
provision of traffic from one subscriber located in one exchange through a central office and out to another central 
office connecting with subscriber premises in a different exchange were interexchange in nature, and as a result, do 
not qualify as Category 1 facilities.  See 2016 SIC Order at 23, para. 74. 
120 47 CFR § 36.152(a)(1). 
121 SIC conceded that subscribers were not served for  Route (from 2007-2013) and  Route (from 
2009-2013); see 2016 SIC Order at 22, para 71. 
122 USAC Report at 14; see supra Section II.A; 47 CFR § 36.154(a). 
123 2016 SIC Order at 23, para. 73. 
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36. In sum, USAC determined that SIC received $26,230,270 in improper payments from the
Fund based on its misclassification of certain C&WF as Category 1 C&WF in cost studies submitted from 
2003 to 2013.124  In today’s 2016 SIC Order, after reviewing the record, including SIC’s responses to 
USAC, the Commission finds that SIC had misclassified its Category 1 C&WF and as a result, received 
improper payments from the Fund.125 
B. USAC Investigation of SIC’s Practices Related to Lease of Abandoned Water Mains 
37. In or about 2001, SIC subleased abandoned water mains for use as underground conduit
of cable and wireless facilities from its affiliate, ClearCom.  Under the terms of the sublease, SIC was 
granted use of approximately  miles of abandoned water mains.  At varying times from 2002 through 
2013, SIC placed sections of abandoned water mains into use as cable conduit.  SIC provided USAC with 
a schedule of when the company began using certain sections of the water mains and the amounts paid to 
ClearCom.126  USAC compared that information to cost studies submitted by SIC to NECA which formed 
the basis for certain high-cost support calculations. 
38. USAC determined that SIC had submitted amount in use amounts higher than what was
actually used for the provision of service.127  Thus, SIC had overpaid ClearCom.  Based on the 
overstatement of water mains in use, USAC calculated that SIC had received improper payments of 
$711,355 for its 2002-2013 cost studies. 
39. In response, SIC conceded that USAC’s computations for the overpayment of high-cost
support related to the abandoned water mains were correct, and that SIC accordingly received improper 
payments totaling $711,355.  In the 2016 SIC Order, the Commission considers SIC’s practices related to 
the abandoned water mains and upholds USAC’s determinations.128  The Commission also concludes that 
SIC violated Section 32.27(c)(2) of the Rules by recording the transaction between SIC and ClearCom 
above the lesser of fair market value or fully distributed cost.129 
C. USAC Investigation into Regulated Expenses and a Bonus Payment to Owner 
40. USAC examined SIC’s expense accounts for the period from January 2013 through June
2015, to assess whether SIC had submitted its costs in accordance with Part 32 of the Commission’s 
Rules.  USAC observed that SIC submitted charitable donations and sponsorships, country club fees, and 
end-of the-year party expenses in its regulated, general and administrative account (Account 6720) 
costs.130  USAC also noted that SIC reported personal expenses for Albert Hee, including Hee family 
meals, personal travel expenses, and cash advances for Albert Hee in its regulated, general and 
administrative account.  
41. USAC requested further information relating to a payment from SIC to WEI in the amount
of $  million that was referenced as a “Bonus to Owner” and disbursed on July 31, 2014.131  SIC 
124 USAC Report at 15. 
125 2016 SIC Order at 22, para. 70. 
126 USAC Report at 28-29. 
127 SIC never claimed 100 percent usage but did claim percentages above those actually used.  For example, in 
Funding Year 2009, SIC claimed 23 percent usage, but based on the actual dates that the additional miles of the 
water main were put into use, there was only 17 percent usage of the water mains for that year.  
128 2016 SIC Order at 37, para. 119 (stating “[g]iven that certain parts of the water mains were not in use during the 
relevant period, Sandwich Isles failed to demonstrate the cost of leasing such property was ‘necessary’” and 
directing USAC to initiate action to recover this support received for costs of the water mains that were not used).   
129 2016 SIC Order at 37, para. 119. 
130 USAC Report at 19-20. 
131 USAC Report at 49. 
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indicated that the $
.  Although SIC indicated that the board members had approved the bonus payment, USAC 
determined that SIC had failed to provide adequate documentation regarding how the bonus amounts 
were determined.   USAC determined that the bonus payment was not reasonable and appeared excessive.  
USAC also noted that SIC had reported the bonus payment in certain regulated accounts, including 
account 6120 (general support account).132  USAC stated, “the Commission has recognized that inclusion 
of excess costs in a carrier’s rate base . . . can increase the demands on the [U]niversal [S]ervice 
[F]und.”133  
42. As a result, USAC determined that SIC received improper payments of $175,090 as a
result of improperly submitting its expenses, as well as improperly submitting the $  million bonus 
payment to Albert Hee.  In the companion order released today, upon review of the record, the 
Commission concludes that SIC had in fact received improper payments based on its submission of 
ineligible expenses.134  Specifically, the Commission finds that all of the donations and sponsorships 
noted in the USAC Report were not eligible for recovery from the Fund.135  The Commission also 
concludes that the bonus payment to Albert Hee was “imprudent and unreasonable.”136 
D. USAC Investigation of Other Issues 
43. Management Fees. USAC also reviewed management fees paid by SIC pursuant to a
management agreement between SIC and Waimana for the period of 2001 through 2013.  In particular, 
USAC examined a lease agreement for commercial office space leased by Waimana in downtown 
Honolulu, Hawaii (Waimana office space) with a commercial real estate company.137  USAC determined 
that under the terms of its commercial lease, Waimana leased the office space for approximately $
per month138 but charged SIC $  per month from 2001 through 2013 for use of space that was 
shared by Waimana, SIC, ClearCom and other corporate entities owned or controlled by Albert Hee.139  
SIC indicated to USAC that the additional $  above the actual $  office lease costs 
represented part of SIC’s share and payment of other office costs charged pursuant to the management 
agreement, including
.140  Over the aforementioned time period, Waimana incurred costs of 
approximately $  for the leased office space, but charged SIC $  for its use of the 
shared space.141  USAC indicated that SIC had provided a table showing WEI’s total office costs (or costs 
above the rent), but it failed to provide any supporting documentation for WEI’s costs.142  USAC took 
132 See 47 CFR §§ 32.6120 (providing information on general support expenses), 35.9999 et seq. (providing the 
instructions and the chart of accounts for expenses accounts). 
133 USAC Report at 48. 
134 2016 SIC Order at 39-42, paras. 126-35. 
135 Id. at 42, para. 135. 
136 Id. at 41, para. 133 (noting, among other things, that at the time SIC made the bonus payment, it was failing to 
pay obligations under a government loan). 
137 USAC Report at 18-27. 
138 The monthly lease cost included $  for base rent and an estimated $  per month for operating 
expenses.  Id. at 17. 
139 Id. 
140 USAC Report at 22, 24. 
141 Id. at 19. 
142 Id. at 25. 
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exception to “the excessiveness of the allocations to SIC.”143  In the 2016 SIC Order, the Commission 
also reviews the management fees paid by SIC to Waimana, and concludes that the fees were 
unreasonable, excessive, and in many cases were unrelated to Sandwich Isles’s obligations under section 
54.7 of the Commission’s Rules.144  The Commission directs USAC to disallow all management fees paid 
by SIC to Waimana for the period 2002 to 2015.145 
44. Corporate Structure.   USAC requested that SIC provide the internal and audited
financials for Paniolo, Ho’opa’a, and ClearCom for certain years from 2002 through 2015.146   USAC 
explained that, given the risks associated with the complex affiliate structure, the extent of payments 
between SIC and its affiliates, and the questionable affiliate transactions discovered during its 
examination, the affiliate financials were necessary for review.147  SIC provided limited information in 
response to USAC’s requests and stated that the affiliate information did not involve SIC, and the affiliate 
companies did not authorize release of the information.148  SIC also stated that SIC was the only entity 
regulated by the Commission.149  Because USAC did not receive the requested financials for Paniolo, 
Ho’opa’a, and ClearCom, USAC was not able to fully assess SIC’s compliance with the Commission’s 
affiliated transactions Rules.150  
45. In the 2016 SIC Order, based on the record, the Commission expresses concern that SIC
was not complying with the Commission’s affiliate transactions rules, and therefore, directs USAC to 
review SIC’s affiliate transactions for costs incurred in calendar year 2016.151 
IV. DISCUSSION
46. The exceptions to the Commission’s Rules identified by USAC warrant enforcement
action and are the subject of the present NAL.  Based on the evidence developed by USAC and the 
Commission’s independent review of the record, including all arguments made by SIC, we conclude that 
SIC apparently violated Section 220 of the Act by failing to maintain its accounts, records, and 
memoranda as prescribed by the Commission, as well as several provisions of the Commission’s Rules.152  
We find that SIC apparently failed to keep its accounts, records and memorandum consistent with the 
Commission’s Rules; miscategorized business expenses and regulated costs; and misclassified its C&WF 
costs, in violation of Parts 32 and 36 of the Commission’s Rules.  SIC apparently committed each of these 
violations, in part, by submitting inaccurate cost study data and falsely certifying the accuracy of that 
data, in violation of Sections 69.601(c) and 69.605(a), which set forth the Commission’s Rules for 
submitting and certifying cost study data relied upon by both USAC and NECA.  The Commission 
143 Id. 
144 2016 SIC Order at 32-36, paras. 102-17. 
145 Id. at 36, para. 117. 
146 USAC Report at 68. 
147 Id.  
148 Id.  
149 Id. at 69. 
150 Id. at 70; see also 47 CFR § 32.27(c). 
151 2016 SIC Order at 45, para. 146. 
152 Section 220(g) provides that “[a]fter the Commission has prescribed the forms and manner of keeping of 
accounts, records, and memoranda to be kept . . .  it shall be unlawful . . . to keep the accounts in any other manner 
than that prescribed or approved by the Commission.”  47 U.S.C. § 220(g).  See also 47 U.S.C. § 220(d).   
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expressly relied upon Section 220 of the Act, among other provisions, as a statutory basis for its adoption 
of Sections 69.601(c) and 69.605(a).153   
47. We find that SIC and Waimana apparently utilized a complex corporate structure under
the direction of Albert Hee, and SIC submitted and falsely certified inaccurate data contained in cost 
studies from 2002 to 2013.  The data (1) included misclassification of its C&WF;154 (2) overstated costs 
related to the lease of water mains with its affiliate, ClearCom;155 and (3) reported certain expenses as 
regulated expenses in contravention of the Commission’s prescribed method of accounting.156  For the 
reasons discussed herein, we conclude that pursuant to Section 220(d) of the Act, SIC, Waimana, and 
Albert Hee are jointly and severally liable for forfeiture penalties totaling $49,598,448.  
48. Separately, among other things, in the 2016 SIC Order we find that, because of its
violations of our Rules, SIC received improper payments from the Fund.157  Specifically, we find that SIC 
acted in contravention of Section 54.7 of the Commission’s Rules when it failed to use USF high-cost 
support “only for the provision, maintenance, and upgrading of facilities and services for which the 
support is intended.”158  Specifically, we find that SIC apparently used a portion of its USF support to pay 
the personal expenses of Albert Hee and his family.   
A. SIC Received More High Cost Support than it was Entitled to by Apparently 
Violating the Act and the Commission’s Rules 
(1) SIC Misclassified its Category 1 C&WF 
49. Based on our independent review the evidence uncovered in this investigation, SIC
misclassified its exchange line-Category 1 C&WF costs resulting in an improperly higher reimbursement 
from the Fund.  
50. In each year from 2003 through 2013, SIC apparently reported most of its C&WF as
Category 1 exchange line facilities.  SIC, however, misclassified a significant portion of its C&WF costs 
as Category 1.  SIC reported the C&WF used to connect one central office to another central office as 
exchange line-Category 1 C&WF, when in fact, those facilities should have been recorded by SIC as a 
Category 2, Category 3, or Category 4 costs.  Section 36.152(a)(1) of the Commission’s Rules 
specifically provides that Category 1 C&WF includes “facilities between local central offices and 
subscriber premises.”159  Thus, based on our review of the record, the facilities connecting central offices 
could not, under program Rules, be exchange line Category 1 C&WF because they did not connect a local 
central office to subscriber premises.160  
51. SIC also apparently reported costs for Category 1 C&WF facilities on routes where there
was no subscriber, and thus no connection to subscriber premises, as required under Section 36.152(a)(1). 
153 See 47 CFR §§ 69.601(c), 69.605(a); see also 47 CFR § 1.80 (governing forfeiture proceedings in the case of a 
forfeiture imposed against a carrier under section 220(d)). 
154 See supra Section III.A; see also 47 CFR §§ 69.601(a), 69.605(a).  
155 See supra Section III.B.; see also 47 CFR §§ 32.2680, 32.2681, 32.3400, 32.6560, 36.154, 36.152(a); American 
Telephone and Telegraph Company, Phase II Final Decision and Order, 64 FCC 2d 1, 46-47, paras. 111-12 (1977). 
156 See supra Sections III.C, D.; 47 CFR §§ 32.14(a), (c) (providing instructions for regulated accounts), 32.23 
(describing accounting treatment for “nonregulated activities), 32.4999 et seq. (providing instructions for revenue 
accounts). 
157 2016 SIC Order at 35, para. 112. 
158 Id. at 34-36, paras. 110, 112, 117; see also 47 CFR § 54.7. 
159 47 CFR § 36.152(a)(1). 
160 2016 SIC Order at 24-25, para. 79.   
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52. Separations are intended to apportion costs among categories or jurisdictions by actual
use or by direct assignment,161 and the Commission’s Rules require direct assignment where feasible.162  
The Commission’s Rules provide specific procedures for the apportionment of exchange line Category 1 
facilities.  Section 36.154(a) states that the first step in the apportioning of exchange line C&WF is the 
determination of an average cost per working loop.  In assigning costs as Category 1 C&WF to routes that 
did not serve subscriber premises, SIC acted in contravention of Section 36.154(a). 
53. The federal high-cost program is designed to ensure that consumers in rural, insular, and
high-cost areas have access to modern communications networks at rates that are reasonably comparable 
to those in urban areas.163  The evidence uncovered in this investigation suggests that SIC purposely 
allocated most of its C&WF costs as Category 1 because those costs are supported by the high-cost 
program under the applicable Rules.164  In so doing, SIC apparently facilitated a scheme that allowed it to 
receive more support than it was entitled to under program Rules.  The evidence established that SIC 
apparently utilized this scheme from at least 2003-2013.   
54. By submitting most of its C&WF as Category 1 exchange line facilities, and reporting
costs for Category 1 C&WF facilities on routes where there was no subscriber, SIC received more support 
from the Fund than to which it was otherwise entitled under program Rules.   
55. Each year, from at least 2003 through 2013, SIC submitted and certified the accuracy of
information contained in its cost studies, including information relating to its Category 1 C&WF costs.165  
Based on these actions, we find that SIC apparently violated several provisions of the Commission’s 
Rules.  In particular, we find that SIC apparently violated Section 69.601(c) of the Commission’s Rules 
by falsely certifying the accuracy of the data contained in its cost studies and Section 69.605(a) by 
submitting inaccurate cost data.166   
(2) SIC Overstated Costs Relating to the Lease of Abandoned Water Mains  
56. SIC overstated the amount of abandoned water mains it used for regulated local exchange
services.  In doing so, it violated the long-established ratemaking principle of used and usefulness, as well 
as the Commission’s Rules.167  SIC entered into a lease with its affiliate, ClearCom, and reported, in its 
cost studies, data related to costs incurred from use of the water mains.  SIC overstated the percentage of 
the water mains that were in use for the provision of high-cost service at certain times within the lease 
period.168 SIC reported the inflated use data in its cost studies and made adjustments to its cost studies to 
reflect costs related to use of the abandoned water mains.  Accordingly, SIC received USF support based 
on these inflated amounts.  Moreover, SIC conceded that USAC’s calculations concerning the percentage 
of the water mains actually in use were correct.169   
57. Under the used and useful doctrine, the Commission allows carriers to include certain
costs in their regulated revenue requirement where the property is necessary for the “efficient conduct of a 
161 See supra Section II.A. 
162 See, e.g., 47 CFR §§ 36.153(a), 36.155(a). 
163 See supra Section II.A. 
164 USAC Report at 13 (providing that Category 1 C&WF have a significant impact on the fund for high-cost loop 
and interstate common line support components of the fund). 
165 See supra Section II.A. 
166 Id. 
167 Id. 
168 USAC Report at 29. 
169 Id. at 30. 
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utility’s business, presently or within a reasonable future period.” 170  Section 54.1305 of the 
Commission’s Rules requires carriers seeking an expense adjustment to file certain information with 
NECA, including “unseparated, i.e., state and interstate, gross plant investment” in Exchange Line 
C&WF and “unseparated depreciation expense attributable to Exchange Line C&WF.”171  In this case, 
SIC apparently submitted inaccurate use data pursuant to Sections 69.605(a) and 54.1305 of the 
Commission’s Rules, including in its regulated revenue requirement property that was not used for the 
provision of local exchange services.     
58. With respect to its use of the abandoned water mains, SIC apparently reported inaccurate
in-use data in cost studies submitted from 2002-2013.  SIC certified the accuracy of the data contained in 
each of those cost studies.  SIC also sought expense adjustments during certain years based on the 
inaccurate in-use data relating to its Category 1 C&WF.  
59. We find that in the submission of data relating to its water main use, SIC violated several
provision of the Commission’s Rules.172  SIC reported inflated costs on accounts 2680, 3400, and 6560, 
thereby apparently violating Sections 32.2680, 32.3400, and 32.6560 of the Commission’s Rules.  SIC 
also violated Section 54.1310 by submitting false information with NECA related to expense adjustments 
for its Category 1 C&WF.  SIC apparently submitted inaccurate cost data pursuant to Section 69.605(a) 
and falsely certified the accuracy of that data in violation of Section 69.601(c).  Moreover, we find that 
NECA and USAC relied on SIC’s accountings and submissions to calculate and/or disburse high-cost 
support.173  
B. SIC Received More Support than it was Entitled to Under Program Rules 
60. We remain committed to the principles of Section 254 of the Act to provide affordable
service to underserved areas, implement fiscal responsibility to control the size of the fund and reduce 
waste and inefficiency, and require accountability from companies that receive support.174  In this regard, 
the Rules governing the high-cost program establish a comprehensive framework for carriers to 
accurately submit their costs and receive support under the program.  Section 54.7 of our Rules expressly 
provides that “[a] carrier that receives federal universal service support shall use that support only for the 
provision, maintenance, and upgrading of facilities and services for which the support is intended.”175  As 
a result of what appears to be pervasive misconduct that has resulted in the apparent violations of several 
of our Rules, SIC received high-cost support that was not used for the provision of supported service.176 
61. Since 2002, SIC received approximately $250 million in high-cost support with
substantial amounts of that support apparently being based upon inaccurate cost studies data submitted to 
NECA, USAC and the Commission.177  As discussed in this NAL and the USAC report, SIC submitted 
inaccurate cost data related to Category 1 C&WF and the amount of leased water mains used for the 
170 American Telephone and Telegraph Company, Phase II Final Decision and Order, 64 FCC 2d 1, 46-47, paras. 
111-12 (1977) (American Tel. and Tel. Co. Order) (stating that “imprudent or excess investment … is the 
responsibility and coincident burden of the investor, not the ratepayer”).   
171 47 CFR § 54.1305. 
172 2016 SIC Order at 37, para. 118-19. 
173 See supra Section II.A. 
174 USF/ICC Transformation Order, 26 FCC Rcd at 17670, para. 11. 
175 47 CFR § 54.7(a).  “The use of federal universal service support that is authorized . . . shall include investments 
in plant that can, either as built or with the addition of plant elements, when available, provide access to advanced 
telecommunications and information services.”  47 CFR § 54.7(b). 
176 2016 SIC Order at 34-35, paras. 110, 112. 
177 USAC Report at 5; see supra Section II.A. 
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provision of high-cost support service.178  SIC, nevertheless, certified as to the accuracy of the data 
contained in its annual cost studies.  
62. USAC identified several instances in which SIC may have reported inaccurate information
in its accounts.179  USAC reviewed a sample of invoices from Waimana to SIC during the period of 2013 
through 2015 and determined that the records showed certain expenses that were recorded as regulated.180  
USAC observed that SIC improperly reported charitable donations, country club fees, and company party 
expenses in its regulated, general and administrative account (Account 6720) costs.181  In the same 
account, USAC also determined that SIC reported travel that was unrelated to SIC, purchases of gas and 
meals for Albert Hee and his family, and cash advances to Albert Hee.182   
63. USAC further determined that SIC awarded a $  million bonus to Albert Hee in 
2014.183  Although SIC explained that the bonus was approved by its board of directors, which was led by 
Albert Hee, and represented an accrued sum that ran from 2009 through 2012, financial records reflect 
that the “bonus” was actually transferred to Waimana to ultimately pay approximately $  in 
defense attorneys’ fees for Albert Hee’s criminal matter.184  We also note that SIC paid the bonus to 
Albert Hee while failing to pay government debt, and at a period in which the company reported an 
operating loss.185  SIC recorded the bonus in its regulated accounts.186   
64. Albert Hee apparently controlled the finances and accounting practices of SIC, Waimana,
and other affiliate corporations.  As his personal assistant Nancy Henderson testified, Albert Hee directed 
SIC to reimburse Waimana and himself, substantial amounts for expenses, including more than $90,000 
for personal massages and instructed Nancy Henderson to categorize the payments as “consulting fees” in 
Waimana’s accounts.187  At Albert Hee’s direction, Waimana paid salaries and benefits to his wife and 
children even though at times they were full-time students, employed by other employers, and they did 
not provide any services to Waimana.  Similarly, Albert Hee directed corporate funds be used to purchase 
a $1.3 million home and $43,000 vehicle for two of his children to live in and use, respectively, while 
they were enrolled in college.188  Albert Hee further directed that corporate funds be used to pay family 
meals, his children’s college tuition, and family vacations to, among other locations, the South Pacific, 
Europe and Disneyworld.   
65. Based on the evidence presented at Albert Hee’s criminal trial, the jury found that, from
2002 through 2013, Albert Hee used money from Waimana’s, SIC’s and other corporate accounts to 
personally enrich himself and his immediate family.189  Thus, as demonstrated by both USAC’s findings 
and the evidence from Albert Hee’s criminal conviction, SIC, Waimana, and Albert Hee consistently 
178 See supra Sections III.C, D. 
179 USAC Report at 38, 40-42. 
180 See 47 CFR §§ 32.23, 32.5999(g), 32.6720 (accounting for non-regulated and regulated expenses). 
181 USAC Report at 20, 48. 
182 Id. at 20. 
183 Id. at 47-48. 
184 A review of financial records reflects transfers for payments that appear to be connected to Albert Hee’s criminal 
defense.  On file in EB-IHD-15-00019603. 
185 2016 SIC Order at 41-42, paras. 132-33. 
186 USAC Report at 48. 
187 See supra Section II.C. 
188 Id.  
189 Id. 
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miscategorized expenses.  NECA and USAC relied on SIC’s inaccurate cost data submissions to award 
high-cost support.  Therefore, SIC apparently received more high-cost support than it was entitled to 
under program Rules.  
66. SIC and Waimana also failed to provide the Commission with financial data related to 
Waimana and other affiliates that could be used to assess the appropriateness of certain costs for which 
SIC sought high-cost support.190  USAC requested internal or audited financial statements for WEI, 
Paniolo, Ho’opa’a, and ClearCom, but SIC refused to provide the requested documents.191  For example, 
SIC did not provide audited financial records related to costs billed monthly by Waimana as management 
fees for “office costs.”192  SIC stated that the costs above its proportionate share of the leased office space 
were for other office costs.193  We are unable to confirm SIC’s explanation because SIC did not provide 
requested supporting documentation for Waimana’s costs and other records showed that expenses such as 
charitable donations, country club fees, and Albert Hee’s personal expenses were included in the 
management fees and reported in cost studies submitted to NECA.  
67. As discussed above, SIC conducted several transactions with Waimana and its affiliates, 
including ClearCom and Paniolo, but declined to provide requested financial information related to those 
entities.  These entities were owned or controlled by Albert Hee, and USF money flowed to them.194  As 
the record suggests, SIC was apparently able to obscure its costs through multiple transactions with its 
affiliates.195  By virtue of his ownership of SIC, Waimana, and other entities, Albert Hee directed SIC to 
use an undetermined amount of high-cost support for purposes apparently unrelated to the “provision, 
maintenance, and upgrading of facilities and services” as required by the Act and Section 54.7 of the 
Commission’s Rules.196   
68. Additionally, as discussed above, carriers must comply with the accounting rules for 
telecommunications carriers found in Part 32 of the Commission’s Rules.  SIC did not do so.  The 
financial data reported pursuant to Part 32 is necessary to support jurisdictional separations and costs of 
service submissions for ratemaking purposes.  Thus, we find that SIC apparently violated Section 
32.12(b) by failing to keep its financial records “with sufficient particularity to show fully the facts 
pertaining to all entries” in the relevant accounts.197  We note that NECA and USAC relied on SIC’s 
submitted financial data to calculate and/or disburse USF support. 
C. Joint and Several Liability of SIC, Waimana, and Albert Hee  
69. Based upon the facts and circumstances of this case, SIC, Waimana, and Albert Hee are, 
for legal purposes, one and the same.   Consequently, we find that they should be jointly and severally 
liable for any penalties and/or forfeitures and/or reimbursements to the Fund.198   
                                                     
190 See supra Section III.D. 
191 USAC Report at 26, 68. 
192 See supra Section III.D.  
193 Id. 
194 See supra Sections II.B, III. 
195 See USAC Report at 66-77. 
196 2016 SIC Order at 34-36, paras. 110, 112, 117; see also 47 U.S.C. § 254(e), 47 CFR § 54.7. 
197 47 CFR § 32.12(b). 
198 See In the Matter of Telseven, LLC, and Patrick Hines, Forfeiture Order, 31 FCC Rcd 1629 (2016) (Telseven 
Forfeiture Order) (piercing the corporate veil to find Patrick Hines personally liable for, among other things, his 
corporation’s failure to contribute fully to the Fund). 
 Federal Communications Commission FCC 16-165   
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70. The Commission has previously concluded that it is appropriate to disregard corporate 
formalities “[w]here the ownership of stock is used to dominate and control the subsidiary in such a 
manner and to such extent that it becomes a mere agency or instrumentality of the parent, the separate 
corporate entities may be disregarded” and “separate corporate structures may be ignored where the 
purpose of a statutory scheme or regulation would otherwise be frustrated.”199  The Commission may hold 
an entity or individual liable for the acts or omissions of a different, related entity: (i) where there is a 
common identity of officers, directors, or shareholders; (ii) where there is common control between the 
entities; and (iii) when it is necessary to preserve the integrity of the Act and to prevent the entities from 
defeating the purpose of statutory provisions.200  Where these legal elements are satisfied, as a practical 
matter, the Commission has held an individual liable for the acts of a separate, corporate entity where the 
named individual possesses significant operational control of the entity, and his or her actions have 
furthered the allegedly unlawful conduct.  For example, in Telseven, we held the sole owner of the 
company at issue in that case individually liable as an “egregious violator[ ] of the Act who create[d] 
sham corporate forms to evade liability.”201 
71. In the present matter, SIC and Waimana, during the relevant period, were corporate 
entities under the common and exclusive ownership and control of Albert Hee.  From at least 2002- 2013, 
Albert Hee was the sole shareholder of Waimana, which wholly owned SIC.202  Witnesses testified that 
Albert Hee exercised near complete control of the companies and their operations.203  SIC and Waimana 
also shared common officers and directors during the relevant period.204  Albert Hee served in numerous 
simultaneous positions for SIC and Waimana, including as the companies’ director and president.205  
                                                     
199 Petition by Telecable Corp. to Stay Construction or Operation of a CATV System in Bloomington and Normal, 
Ill., Decision,19 FCC 2d 574, 587 (1969). 
200 See Telseven Forfeiture Order, 31 FCC Rcd at 1631, para. 8.  The Commission and the courts have long stated 
that “[w]here the statutory purpose could … be easily frustrated through the use of separate … entities, the 
Commission is entitled to look through corporate form and treat the separate entities as one and the same for purpose 
of regulation.” Improving Pub. Safety Commc'ns in the 800 MHz Band, Fifth Report and Order, Eleventh Report and 
Order, Sixth Report and Order, and Declaratory Ruling, 25 FCC Rcd 13874, 13887–88 (2010) (citing Gen. Tel. Co. 
of the S.W. v. United States, 449 F.2d 846, 854 (5th Cir. 1971)); see also Capital Tel. Co., Inc. v. FCC, 498 F.2d 
734, 739 (D.C. Cir. 1974) (Capital Telephone) (finding that the Commission correctly treated the individual and the 
corporation he controlled as the same entity and granted only one license and that “substantial evidence supports the 
Commission's decision to pierce Capital's corporate veil in order to carry out the statutory mandate ‘to provide a fair, 
efficient, and equitable distribution of radio service.’”). The courts have also looked through the corporate form in 
analogous situations, such as cases involving: the parent and subsidiaries where an entity was created to circumvent 
agency liability, Transcontinental Gas Pipe Line Corp. v. FERC, 998 F.2d 1313, 1321–22 (5th Cir. 1993) (finding 
that FERC correctly looked behind corporate forms and treated the parent and subsidiaries as a single entity where 
the parent pipeline set up subsidiaries to sell gas at prices at which the parent could not legally sell); two 
corporations that were controlled by one family, Mansfield Journal Co. (FM) v. FCC, 180 F.2d 28, 37 (D.C. Cir. 
1950) (concluding that although two newspapers were separate corporations, with separate editorial staffs, and 
located in communities over fifty miles apart, the Commission correctly denied applications of both corporations 
when the record showed that one family owned all of the stock in both corporations, the owners took active part in 
the control and policy formulation of the newspapers, and the true applicant in each case was the same group of 
individuals); and several corporations that were used to operate one business, Schenley Distillers Corp. v. United 
States, 326 U.S. 432, 437 (1946) (“The fact that several corporations are used in carrying on the business does not 
relieve them of their several statutory obligations more than it relieves them of the taxes severally laid upon them.”).  
201 See Telseven Forfeiture Order, 31 FCC Rcd at 1634, para. 13. 
202 See supra Section II.B. 
203 See Trial Tr. vol. 2, 47, 51. 
204 See Responses to USAC Investigation, Audit Inquiry 21 – “Sandwich Isles Communications Inc. Board 
Members” and Audit Inquiry 80 – Board Meeting Minutes.  
205 See supra Section II.B. 
 Federal Communications Commission FCC 16-165   
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Janeen-Ann Olds served as general counsel for SIC and Waimana and currently serves as SIC’s CEO and 
as a director.  Robert Kihune also served in several roles for both companies, including Chairman of the 
Board and CEO of SIC, as well as, an officer at Waimana.206  Lastly, Albert Hee’s daughter, Breanne 
Hee-Kahalewai, is both an owner (by way of her trust) and a director of Waimana, as well as an officer of 
SIC.207 
72. Also, it is undisputed that SIC and Waimana share the same operational space – one in 
which SIC paid most, if not all, of the lease expense.208 The entities shared office space, first on Bishop 
Street, (Honolulu, Hawaii), then in a building owned by ClearCom, but located on real property owned by 
SIC, in Mililani, Hawaii.209 
73. The closeness of their operations further corroborates the common identity of SIC and 
Waimana.  In particular, Waimana and its affiliates only existed to service each other.210  Evidence 
presented at Albert Hee’s criminal trial suggests that Waimana paid Albert Hee’s personal expenses, then 
billed and was reimbursed for such expenses by SIC.211  SIC in turn sought and received support from the 
Fund for these expenses.212  USAC noted that Waimana’s corporate structure consisted of several affiliate 
agreements, “without which, it appears that many of the entities would not be able to operate.”213  Albert 
Hee moved or assigned employees from one company to another to perform work and used SIC 
employees to sustain the affiliates who altogether had few, if any, employees.214   
74. Albert Hee also controlled the finances of both companies.  As Nancy Henderson, Albert 
Hee’s long-time assistant, testified, and Albert Hee acknowledged, Albert Hee directed how expenses 
were allocated to the different companies.215  Albert Hee categorized specific expenses as business 
expenses and directed that Waimana place his family members on its payroll.216  SIC, Waimana, and the 
affiliated companies did not possess corporate credit cards; rather, Albert Hee used his personal credit 
cards for company purchases.217  USAC observed that large volumes of affiliate financial transactions 
flowed through SIC’s accounts.218  In addition, SIC’s payment of management fees to Waimana 
constituted nearly all of Waimana’s total revenue.219   
75. Furthermore, the facts and circumstances of the present matter require us to disregard the 
separate corporate identities of SIC and Waimana in order to ensure the integrity of the high-cost 
program.  Holding Waimana and Albert Hee additionally responsible for the apparent violations described 
                                                     
206 Id; see supra Section II.B.; see also Responses to USAC Investigation, Audit Inquiry 80 – “Item 80 – BOD WEI, 
SIC and Miscellaneous Companies.” 
207 See supra Section II.B.  
208 See supra Section III.D; see also USAC Report at 17-27. 
209 USAC Report at 54. 
210 Id. at 71-72. 
211 See supra Section II.C. 
212 2016 SIC Order at 35, paras. 111-12; see supra Section III.B.2. 
213 USAC Report at 70-71. 
214 See, e.g., Responses to USAC Investigation, Audit Inquiry 28 – List of Employees. 
215 See supra Section II.C. 
216 Id.; see Trial Tr. vol. 2, 47, 51, 54-58; vol. 9, 194-195; vol. 10, 8; Gov’t Ex. 4-101.  
217 See supra Section II.C; see also Trial Tr. vol. 2, 87. 
218 USAC Report at 3, 72. 
219 See supra Section III.D. 
 Federal Communications Commission FCC 16-165   
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in this NAL furthers the Commission’s goal of properly enforcing rules that are aimed to achieve 
compliance, enforcement, the recovery of improper payments, and penalties for conduct that results in the 
transfer of assets from regulated to unregulated entities.220     
76. SIC apparently sought more USF support than it was entitled to and apparently misused 
USF support by transferring money to Waimana, as well as other affiliates, that was used for the personal 
benefit of Albert Hee and his immediate family.  Financial records submitted to USAC and obtained from 
Albert Hee’s criminal tax trial reveal “management fees” paid by SIC to Waimana, including personal 
expenses benefiting Albert Hee and his family.221   
77. The Commission has previously reiterated its commitment “to providing support that is 
sufficient but not excessive”222 and provided “imprudent or excess investment …is the responsibility and 
coincident burden of the investor, not the ratepayer.”223  The failure of a carrier, such as SIC, to abide by 
these obligations undermines the goals and purpose of the high-cost program.  Accordingly, we find that 
SIC apparently violated Section 220 of the Act and Sections 69.601(c) and 69.605(a) of the 
Commission’s Rules; and SIC, Waimana, and Albert Hee are jointly and severally liable for the resulting 
forfeitures and reimbursements to the Fund. 
V. PROPOSED FORFEITURE   
 
78. In light of SIC’s apparent violations of the Act and the Commission’s Rules, we find that a 
proposed forfeiture is warranted pursuant to Section 220(d) of the Act, which governs forfeitures in 
instances in which a carrier fails to keep its accounts and records in the manner prescribed by the 
Commission.224  Where a carrier fails to maintain “such accounts, records, memoranda, documents, 
                                                     
220 See Telseven Forfeiture Order, 31 FCC Rcd at 1636, para. 19 (providing,“[i]n an investigation such as this one, 
where the corporate enterprise was designed to carry out the fraudulent activities of one person . . . we find that the 
purpose of the statute would otherwise be frustrated if we permitted Patrick Hines to hide behind his corporate 
entities and avoid personal liability for such statutory violations.”);  Ernesto Bustos Licensee of Station WTBL-CD 
Lenoir, North Carolina, Forfeiture Order, 29 FCC Rcd 1898, 1900 (2014) (finding that “Catawba Broadcasting and 
Ernesto Bustos are the same ‘person’” and stating that “[a] corporation will be looked upon as a legal entity ‘until 
sufficient reason to the contrary appears; but, when the notion of legal entity is used to defeat public convenience, 
justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons.’”). 
221 See supra Section II.C. 
222 Fifth Order on Reconsideration, 27 FCC Rcd at 14557, para. 22 and n.42 (internal quotation omitted); see also 
47 U.S.C. § 254(b)(1), (4)-(5), (d), (e); Alenco Communications, Inc. v. FCC, 201 F.3d 608, 620-21 (5th Cir. 2000) 
(“The agency’s broad discretion to provide sufficient universal service funding includes the decision to impose cost 
controls to avoid excessive expenditures that will detract from universal service.”); Qwest Communications Int’l, 
Inc. v. FCC, 398 F.3d 1222, 1234 (10th Cir. 2005) (“[E]xcessive subsidization arguably may affect the affordability 
of telecommunications services, thus violating the principle in § 254(b)(1).”) (citing Qwest Corp. v. FCC, 258 F.3d 
1191, 1200 (10th Cir. 2001)); Rural Cellular Assn. v. FCC, 588 F.3d 1095, 1102 (D.C. Cir. 2009) (explaining that in 
assessing whether universal service subsidies are excessive, the Commission “must consider not only the possibility 
of pricing some customers out of the market altogether, but the need to limit the burden on customers who continue 
to maintain telephone service”). 
223American Tel. and Tel. Co., Phase II Final Decision and Order, 64 FCC 2d 1, at 38, para. 112. 
224 47 U.S.C. § 220.  To impose such a forfeiture penalty, the Commission must issue a notice of apparent liability, 
and the person against whom the notice has been issued must have an opportunity to show, in writing, why no such 
penalty should be imposed. 47 CFR §1.80(f).  The Commission will then issue a forfeiture if it finds, by a 
preponderance of the evidence, that the person has violated the Act or a Commission Rule.  See, e.g., SBC 
Communications, Inc., Apparent Liability for Forfeiture, Forfeiture Order, 17 FCC Rcd 7589, 7591, para. 4 (2002); 
see also IDT Corp., Notice of Apparent Liability for Forfeiture, 23 FCC Rcd 10805 (2008). 
 Federal Communications Commission FCC 16-165   
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papers, and correspondence,” Section 220(d) imposes a per day penalty.225  Such penalties are subject to 
mitigation or remission in accordance with Section 504 of the Act.226  Section 220 violations thus stand in 
contrast to other infractions for which the Act establishes no specific forfeiture amount.227 
79. In this NAL, we find, among other things that, SIC apparently violated the Part 32, 36, and 
69 of the Commission’s Rules when it failed to keep its accounts, records and memorandum consistent 
with the Commission’s prescribed methods; and in a companion 2016 SIC Order, we find that SIC 
violated Section 54.7 of our Rules.  We find that SIC committed each of these violations, in part, by 
submitting inaccurate cost study data and falsely certifying the accuracy of that data.  We therefore base 
our proposed forfeiture penalty on apparent violations of Sections 69.601(c) and 69.605(a), which set 
forth the Commission’s Rules for submitting and certifying cost study data relied upon by both USAC 
and NECA.  Sections 69.601(c) and 69.605(a) prescribe the manner in which carriers must submit and 
certify as to the accuracy of specified documents, and the Commission expressly relied upon Section 220 
of the Act, among other provisions, as a statutory basis for its adoption of Sections 69.601(c) and 
69.605(a).228   
A. Proposed Forfeiture Penalty for Failing to Keep Accounts, Records, and 
Memoranda in the Manner Prescribed by the Commission 
80. As a result of the apparent violations of Section 220(d) of the Act and Sections 69.601(c) 
and 69.605(a) of the Commission’s Rules,229 we find SIC, Waimana, and Albert Hee apparently jointly 
and severally liable and propose a forfeiture penalty of $49,598,448.  As discussed in this NAL and the 
companion 2016 SIC Order, SIC submitted and certified inaccurate data in cost studies filed from 2002 
through 2013.  Pursuant to Section 1.80(c)(2) of the Commission’s Rules, however, the proposed 
forfeiture is specifically based on apparent violations for cost study years 2010, 2011, 2012, and 2013, 
which occurred within five years of this NAL.  In each of these years, SIC filed and certified its cost 
                                                     
225 47 U.S.C. § 220(d).  The statutory maximum amount of a forfeiture penalty assessed under Section 1.80 of the 
Commission’s Rules is subject to inflation-based adjustments at least once every four years.  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 2013. See Amendment of Section 1.80(b) of the 
Commission’s Rules, Adjustment of Civil Monetary Penalties to Reflect Inflation, DA 13-1615, 2013 WL 3963800 
(Enf. Bur. 2013); see also Inflation Adjustment of Monetary Penalties, 78 Fed. Reg. 49,370-01 (Aug. 14, 2013) 
(setting Sept. 13, 2013, as the effective date for the increases).  However, because the DCIA specifies that any 
inflationary adjustment “shall apply only to violations which occur after the date the increase takes effect,” we apply 
the forfeiture penalties in effect at the time the violation took place.  28 U.S.C. § 2461 note (6).  Relevant here, the 
inflation-adjusted statutory forfeitures that were effective for violations of Section 220(d) from December 6, 2011 – 
July 31, 2016 was $9,600 per day and $11,362, beginning on August 1, 2016.   
226 See 47 CFR § 1.80(b)(4), note, section III; see also 47 USC § 504(b) (providing that forfeitures imposed by title 
II “shall be subject remission or mitigation by the Commission, under such regulations and methods of ascertaining 
the facts as may seem to it advisable”).  For convenience, the Commission treats such forfeitures as prescribed base 
amounts that are subject to downward adjustment, using the downward adjustment criteria applicable to Section 503 
forfeitures in Section II of the note to Section 1.80(b)(4).  See 47 CFR § 1.80(b)(4), Note, Section III.     
227 In cases where there is no prescribed penalty, forfeiture determinations are governed by Section 503 of the Act, 
which, among other things, establishes maximum forfeiture amounts that are subject further adjustment based upon 
the circumstances. 
228 See 47 CFR §§ 69.601(c), 605(a); see also 47 CFR § 1.80 (governing forfeiture proceedings in the case of a 
forfeiture imposed against a carrier under section 220(d)). 
229 See 47 CFR § 1.80(c)(2) (“In the case of a forfeiture imposed against a carrier under sections 202(c), 203(e), and 
220(d), no forfeiture will be imposed if the violation occurred more than 5 years prior to the issuance of a notice of 
apparent liability.”) 
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study,230 then subsequently revised each cost study.231  We note that the revised cost studies included 
inaccurate data, and to date, SIC has failed to correct the cost studies.  Thus, we find that the violations 
for each of the four revised cost studies continued from the relevant filing date through the date of the 
release of this NAL.232  During this period, the per day penalty authorized by Section 220(d) of the Act 
and Section 1.80(c) of the Rules was first $9,600 then adjusted to $11,362 per day.233  We therefore 
calculate a per day penalty for the cost studies for 2010 through 2013. 234  We find no basis for a 
downward adjustment under Section 1.80 of our rules and thus, do not mitigate the forfeiture penalty.  
The table below reflects our forfeiture penalty calculation. 
Cost 
Study 
Year 
Certification 
Date 
Penalty 
Amount (Cert. 
date - 7/31/16) 
Inflation Adjusted 
Penalty Amount 
(8/1/16-12/5/16)  Sub-Total  
2010 12/6/2011 $9,600.00 $11,362.00 $      17,732,412.00 
2011 12/26/2012 $9,600.00 $11,362.00 $      14,026,812.00 
2012 12/9/2013 $9,600.00 $11,362.00 $      10,686,012.00 
2013 12/12/2014 $9,600.00 $11,362.00 $         7,153,212.00 
$      49,598,448.00 
 
81. SIC, Waimana, and Albert Hee received excessive funds as a direct result of the inaccurate 
submissions and certifications.  Based on the total record before us, the widespread scope of the improper 
conduct at issue, and what appears to be a systematic disregard for the high-cost program Rules, we find 
that $49,598,448 is an appropriate penalty for the violations identified in this NAL. We find that this 
proposed forfeiture penalty reasonably reflects the Commission’s commitment to protect the Fund from 
waste, fraud and abuse, as well as the magnitude of SIC’s violations. 
82. As discussed, we find that piercing the corporate veil is appropriate in this case.  Based on 
the ongoing, widespread conduct exhibited by SIC and Waimana at Albert Hee’s direction, we find that 
the imposition of a significant forfeiture amount is necessary to deter future Rule violations and imposing 
                                                     
230 For cost study year 2010, the original certification is dated July 29, 2011.  For cost study year 2011, the original 
certification is dated July 29, 2012.  For cost study year 2012, the original certification is dated July 31, 2013.  For 
cost study year 2013, the original certification is dated July 23, 2014. 
231 For its revised 2010 cost study, SIC’s revised certification is dated December 6, 2011.  For its revised 2011 cost 
study, the revised certification is dated December 26, 2012.  For its revised cost study year 2012, SIC’s revised 
certification is dated December 9, 2013.  For its revised 2013 cost study, SIC’s revised certification is dated 
December 12, 2014. 
232 We find that these apparent violations continue until these cost studies are corrected.   See, e.g., Purple 
Communications, Inc., Forfeiture Order. 30 FCC Rcd 14892, 14900, para. 25 (2015) (Purple Forfeiture Order); 
BellSouth Telecommunications, LLC, d/b/a AT&T Southeast, Notice of Apparent Liability for Forfeiture, FCC 16-98 
(FCC July 7, 2016) (BellSouth NAL); Total Call Mobile, Inc., Notice of Apparent Liability for Forfeiture and Order, 
31 FCC Rcd 4191, 4191, para. 81 (2016) (Total Call Mobile NAL); VCI Company, Notice of Apparent Liability for 
Forfeiture and Order, 22 FCC Rcd 15933, 15940, para. 20 (2007) (finding that a carrier's failure to file an accurate 
form or failure to file a form has a continuing harmful impact on the Universal Service Fund and concluding that the 
failure to file an accurate form constitutes a continuing violation that does not begin to run until the violation is 
cured). 
233 See 47 U.S.C. § 220(d); see also supra Section IV.A., B. 
234 See supra n.226 (providing the filing date for each of the revised cost study certifications, which is the first day 
of each of the four violations included in the forfeiture penalty).  For example, the calculation of the 2010 cost study 
year penalty includes a per day penalty beginning on December 6, 2011, and continuing until today. 
 Federal Communications Commission FCC 16-165   
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a significant forfeiture should achieve broader industry compliance with the Commission’s Rules.  The 
Commission has stated: 
Enforcing our accounting [R]ules and reporting requirements is essential for the Commission to 
carry out its statutory obligations to ensure the rates for telecommunications services remain just 
and reasonable.  Our ability to carry out these obligations is impaired if we cannot rely upon the 
information that carriers are required to submit about the costs of their operations and their 
allocations of those costs, or if those allocations are made improperly.235 
83. Accordingly, we find that SIC, Waimana, and Albert Hee are apparently liable for a 
forfeiture penalty of $49,598,448 for SIC’s repeated violations of Section 220 of the Act and Sections 
69.601(c) and 69.605(a) of the Commission’s Rules.  This penalty is separate from any amount that SIC 
may be required to repay in order to make the Fund whole. 
84.   In addition, in light of SIC’s egregious misconduct and the demonstrated harm to the 
Fund from its apparent violations, we order SIC to submit a report, within sixty (60) days of the release of 
this NAL, explaining why the Commission should not initiate proceedings against SIC to revoke its 
Commission authorizations, including but not limited to, its Section 214 authorizations.  The Commission 
remains committed to maintaining service to all customers on the Hawaiian Home Lands and will 
coordinate with the Hawaii Public Utilities Commission (Hawaii Commission) to ensure continued 
service.   The Commission directs WCB to issue a Public Notice seeking comment from the Hawaii 
Commission, Department of the Hawaiian Home Lands, and other stakeholders on this matter.   
VI.  ORDERING CLAUSES  
85.  Accordingly, IT IS ORDERED that Sandwich Isles Communications, Inc., Waimana 
Enterprises, Inc., and Albert S.N. Hee, pursuant to Section 220(d) of the Communications Act of 1934, as 
amended, and Section 1.80 of the Commission’s Rules, are hereby NOTIFIED of their APPARENT 
LIABILITY FOR A FORFEITURE in the amount of $49,598,448 for violating the Act and the 
Commission’s Rules. 
86.  IT IS FURTHER ORDERED that, pursuant to Section 1.80 of the Rules,236 within thirty 
(30) calendar days of the release date of this Notice of Apparent Liability for Forfeiture and Order, 
Sandwich Isles Communications, Inc., Waimana Enterprises, Inc., and Albert S.N. Hee 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 88 below. 
87.  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.  SIC shall also send 
electronic notification of payment to Loyaan Egal, at Loyaan.Egal@fcc.gov, and Rakesh Patel, at 
Rakesh.Patel@fcc.gov,  Romanda.Williams@fcc.gov, Dangkhoa.Nguyen@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.237  When completing the FCC Form 159, enter the Account Number in block number 
23A (call sign/other ID) and enter the letters “FORF” in block number 24A (payment type code).  Below 
are additional instructions you should follow based on the form of payment you select: 
? Payment by check or money order must be made payable to the order of the Federal 
Communications Commission.  Such payments (along with the completed Form 159) must be 
mailed to Federal Communications Commission, P.O. Box 979088, St. Louis, MO 63197-9000, 
                                                     
235 In the Matter of US West, Order to Show Cause, 10 FCC Rcd 5523, para. 2 (1995). 
236 47 CFR § 1.80. 
237 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 16-165   
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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.  20554.238  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.    
88.  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.239 The written statement must be mailed to the Office of the 
Secretary, Federal Communications Commission, 445 12th Street, SW, Washington, D.C. 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 
Rakesh.Patel@fcc.gov, Romanda.Williams@fcc.gov, and Dangkhoa.Nguyen@fcc.gov. 
89.  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.  
90.  IT IS FURTHER ORDERED that SIC shall respond to the request in paragraph 84 
within sixty (60) calendar days of the release date of this Notice of Apparent Liability for Forfeiture and 
Order. 
                                                     
238 See 47 CFR § 1.1914. 
239 47 CFR §§ 1.16, 1.80(f)(3). 
 Federal Communications Commission FCC 16-165   
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91. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability for 
Forfeiture shall be sent by certified mail, return receipt requested, and first class mail to James Arden 
Barnett, Jr., RDML (ret.) USN, Venable LLP, 575 Seventh Street, NW, Washington, D.C. 20004. 
 
FEDERAL COMMUNICATIONS COMMISSION 
 
 
 
 
     Marlene H. Dortch 
                 Secretary