In a significant development for corporate accountability in telecommunications, the Butler, Pennsylvania-based Armstrong Group has agreed to fork over $6.5 million to settle allegations of inflating its costs to secure more federal subsidies than it deserved. The allegations implicated the Armstrong Group in a scheme to game the system of the FCC’s High-Cost Program, which is a part of the Universal Service Fund designed to extend modern communications services to rural and hard-to-reach areas, according to the U.S. Justice Department.
The Armstrong Group, including several of its incumbent local exchange carriers (ILECs) operating in multiple states, reportedly failed to adhere to FCC rules on cost reporting. This lapse, intentional or not, led the company to pocket more government subsidies than it was entitled to between 2008 and 2023, and as government officials pointed out, every ill-gotten dollar represented not just a federal violation but a direct hit to the very communities most in need of reliable connectivity, today's settlement underscores the U.S. government's ongoing fight to uphold the rule of law within its federal programs.
"Telecommunications providers that seek to participate in important FCC programs like the High-Cost Program must comply with applicable rules, including those governing how they report the costs used to calculate their subsidies," Principal Deputy Assistant Attorney General Brian M. Boynton expressed, reinforcing the government’s stance on strict adherence to regulatory frameworks. U.S. Attorney Eric G. Olshan added that the settlement accentuates the government's resolve to ensure fair business practices and safeguard the public's access to crucial telecommunications services, as per the U.S. Justice Department.
Michele Ellison, General Counsel for the FCC, lauded the collaborative effort that brought the Armstrong Group to justice, animal spirits that can wreak havoc on the trust and the treasury we must harness and direct towards equitable ends, for in this digital age, the quest for universal broadband connectivity mandates a diligent guard against those who would undermine the systems built to foster it, ensuring support only reaches those who abide by the rules.
This settlement also includes a whistleblower award, where James Ranko, a former Armstrong Group employee who filed under the qui tam provisions of the False Claims Act, will receive a $1,267,500 cut of the settlement for his role in bringing the allegations to light. Alongside the financial settlement, the Armstrong Group is mandated to adopt new controls and oversight measures to ensure future compliance with FCC guidelines.
The legal efforts were a coordinated push between the Justice Department's Civil Division, the U.S. Attorney's Office for the Western District of Pennsylvania, and the FCC’s Office of Inspector General, with the FCC’s Office of General and Special Counsel lending a hand. Although the Armstrong Group has settled, it is important to note that the settlement is not an admission of liability, but the resolution of alleged violations in reporting subsidy claims.
