REMEDIES FOR FRAUD, WASTE, AND ABUSE
IN GOVERNMENT BROADBAND PROGRAMS
The American Recovery and Rehabilitation Act (ARRA), also known as the "economic stimulus" legislation appropriated $7.2 billion for broadband expansion grants in the United States. These funds were allocated between two major programs, the Broadband Technologies Opportunities Program (BTOP), administered by the National Telecommunications and Information Administration (NTIA), a division of the United States Department of Commerce and the Broadband Initiatives Program (BIP), administered by the Rural Utilities Service (RUS), a division of the United States Department of Agriculture.
In a recent update on the status of the BTOP program, Assistant Secretary of Commerce, Lawrence Strickling recalled the massive task that the ARRA put before it:
In less than 20 months, NTIA built a multi-billion dollar grant program from the ground up. This is the largest grant program that NTIA has ever managed and is one of the largest ever managed at the Department of Commerce. We had to hire staff, build the information systems, develop the rules, perform due diligence on the proposals, and award over $4 billion in grants, all before this past September 30.
Similarly, the RUS also had a very short time frame in which to lend the funds allocated to it through the BIP.
Given the scale of the task given to the NTIA and RUS, the amount of funds distributed, and the short time frame in which the funds were distributed, it would be surprising if there were no incidents of fraud, waste or abuse in either of the programs.
The focus of the federal broadband funds was supposed to be on unserved areas. However, there have been complaints reported in the trade media that some grant recipients are using federal broadband funds to overbuild areas already served, in some cases, by multiple broadband providers. For example, in Hays, Kansas, a grant was awarded to Nex-Tech, an affiliate of a small local telephone company, Rural Telephone Service Co. of Lenora, Kansas. The cable operator in Hays, Eagle Communications, objected to the grant proposal, claiming federal funds would be used to overbuild Hays, which is already served by privately funded broadband service providers. After the grant was awarded, the National Cable and Telecommunications Association (NCTA) complained to the NTIA, attaching a letter from the President of Eagle which stated that while the grant was supposed to be used to serve areas of Kansas 99.5% unserved or underserved, much of the federal funding is going to "one of the best-served communities in Western Kansas." Similar complaints have been made with respect to grants awarded to LBH, LLC for Vinson/Moss Bluff, Louisiana and Zito Media Communications in Crawford County, Pennsylvania. There have also been complaints in Maine and Georgia.
It is important for companies whose business and investment may be impacted negatively by federal broadband stimulus-backed projects to be aware of potential legal remedies they may have with respect to such projects.
1. False Claims Act. (31 U.S.C. 3729 et seq.). Congress enacted the False Claims Act as a tool to prevent fraud and abuse in federal programs and procurement projects. Since its original enactment after the Civil War, the Act has been updated several times. Key aspects of the law are:
- Liability is created against any "person" who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval."
- The United States Supreme Court has ruled that a "person" under the False Claims Act includes a county or municipality, but does not include a state.
- Potential maximum liability under the act includes 3 times the amount of damages sustained by the government as a result of the fraudulent claim. In addition, civil penalties of between $5,000 and $10,000 can be imposed.
- The statute includes the right of "whistleblowers" to sue any "person" under the statute. A successful whistleblower lawsuit can receive up to 30% of the proceeds from any settlement or judgment.
- Special procedures must be followed in filing a private civil action under the False Claims Act, including a requirement that the complaint be filed under seal with the court and the United States Department of Justice. The Justice Department has 60 days to review the complaint before it decides whether to prosecute, or to decline and allow the private complainant to prosecute the complaint.
2. File Complaint with the Appropriate Office of Inspector General (OIG). The activities of each federal agency are monitored by an Office of Inspector General (OIG). Each OIG has a web site with information on how to submit a complaint about actions or practices of a particular agency. For the U.S. Department of Commerce, the web site is: http://www.oig.doc.gov/oig/hotline/000015.html. For the RUS, the USDA has regional investigative offices. The nearest office to Minnesota is in Kansas City, Missouri. Contact information for the USDA OIG regional and national offices can be found at: http://www.usda.gov/oig/national.htm. The Inspectors General for federal agencies have authority to investigate fraud, waste, abuse, and misconduct with respect to agency programs. OIG investigations can lead to criminal prosecutions. Complaints regarding fraud, waste, abuse, or misconduct can be filed either directly with the federal Recovery Accountability and Transparency Board, or with the OIG for the appropriate agency.
