GCI agrees to pay $40 million in settlement with federal government

The largest telecommunications company in Alaska has agreed to pay the federal government $40 million to resolve allegations that it knowingly inflated prices under a federal program that subsidizes telecommunications costs for rural medical providers, the Justice Department said Thursday.

Anchorage-based GCI was accused of submitting false claims between 2013 and 2020 to the Federal Communications Commission, and causing rural health care providers in Alaska to submit false claims to the FCC, according to the 25-page civil settlement.

The claims were related to funding years between 2012 and 2016, under the FCC’s Rural Health Care Program, the settlement said.

The company also faced accusations that it violated bidding regulations in connection with its participation in the program, the Justice Department said.

GCI spokeswoman Heather Handyside said in an emailed statement that the company has served Alaskans for more than 40 years.

”This settlement concludes several years of active discussions with federal regulatory agencies,” Handyside said. “It reflects the result of both broad changes in program guidance and past challenges GCI identified during an extensive internal review.”

“The FCC recently updated its guidance for calculating rates charged under the Rural Health Care program, and this settlement specifically reflects GCI’s agreement to apply this guidance retroactively to the years 2010 through 2016,” Handyside said. “The settlement also resolves a limited number of compliance issues related to GCI’s participation in the Rural Health Care program which GCI identified and self-reported. GCI has conducted a comprehensive internal review to ensure that appropriate protocols are in place going forward and that we are coordinating with our customers and federal agencies in the application and administration of funds.”

GCI made nearly $1 billion in revenue in 2022, according to owner Liberty Broadband, of Colorado.

The Rural Health Care Program provides close to $600 million annually to help rural health care providers with telecommunications needs. The subsidy helps reduce rural telecommunications costs that are more expensive than in urban areas. Contracts for the service are awarded through a competitive bidding process.

The federal government asserted that GCI did not comply with FCC regulations governing how telecommunications companies must calculate their prices to receive the subsidy payments, the Justice Department said. That led to higher payments than GCI should have received.

“The United States further alleged that GCI caused Eastern Aleutian Tribes Inc., a rural health care provider in Alaska, to agree to inflated prices after the relevant contract was competitively bid,” the Justice Department said. “As a result, GCI knowingly received higher payments under the program, from 2015 through 2018, in connection with its contract with Eastern Aleutian Tribes, Inc.”

The allegations arose in a 2019 complaint brought under the False Claims Act by a whistleblower, Robert Taylor, GCI’s former director of business administration. According to the agreement, Taylor will receive $6.4 million of the GCI settlement payment — his share of the recovery under the act’s whistleblower provisions.

Taylor could not immediately be reached Thursday.

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“(Taylor) had alleged that GCI falsely claimed and received funds from the FCC’s Rural Health Care Program in connection with a contract between GCI and Eastern Aleutian Tribes that increased the rates charged by GCI after the competitive bidding period closed, in violation of FCC regulations,” the settlement says.

“(Taylor in January 2020 also) filed an amended complaint that added allegations that GCI caused rural health care providers to purchase unnecessarily high bandwidth and that GCI understated the contributions it was required to pay to the Universal Service Fund as a telecommunications provider,” the settlement says.

The Universal Service Fund supports affordable telecommunications for rural health care providers and eligible schools and libraries, among other services.

Taylor in 2021 filed a second amended complaint, “adding allegations that GCI falsely claimed and received funds from the Rural Health Care Program based upon rural telecommunications rates GCI calculated in violation of FCC regulations and that GCI violated the FCC’s Schools and Libraries Program (known as E-Rate) regulations requiring that telecommunications companies only charge the lowest corresponding price,” the settlement says.

The settlement does not further address the allegation involving the Schools and Libraries program, which helps schools and libraries receive affordable broadband.

Handyside, with GCI, said “the settlement includes all claims. The (Justice Department) reviewed but did not pursue those claims.”

The settlement agreement was entered into by GCI, the Justice Department and Federal Communications Commission, and Taylor. The settlement “is neither an admission of liability by GCI nor a concession by the United States that its claims are not well founded,” it says.

Paul Mueller, chief executive of Eastern Aleutian Tribes, which operates clinics in the Aleutians and Alaska Peninsula region, said the organization did not lose money or service due to GCI’s actions.

He said that telecommunications services are critically important in rural areas of Alaska such as the eastern Aleutian Islands, for services such as telehealth or communicating records.

He said he was glad to see the federal government providing oversight.

”This is a course correction of integrity,” he said.

”This keeps the other internet providers on their toes,” he added.

GCI has also agreed to enter into a corporate compliance agreement with the Federal Communications Commission to ensure it meets the terms of the Rural Health Care Program in the future, the Justice Department said. GCI will also resolve an administrative investigation and proceeding at the FCC related to the company’s participation in the Rural Health Care Program, the agency said.

Of the $40 million settlement, $26 million is restitution, according to the agreement.

Liberty Broadband acquired GCI following a $1.1 billion buyout of the company in 2017.