Butler, Pennsylvania-based Armstrong Group has agreed to pay $6.5 million to resolve allegations that it violated the False Claims Act by knowingly violating the Federal Communications Commission’s (FCC) rules governing the agency’s High-Cost Program and submitting improper costs to inflate the subsidies it received from the federal Universal Service Fund (USF).
The FCC established the USF to ensure all people in the United States have access to rapid, efficient, nationwide communications services with adequate facilities at reasonable charges. The High-Cost Program is one of four programs comprising the USF and aims to ensure consumers in rural, insular, and high-cost areas have access to modern communications networks capable of providing reasonably comparable voice and broadband service at rates similar to those in urban areas. In pursuit of that goal, the High-Cost Program provides federal funds to qualified eligible telecommunications carriers, including incumbent local exchange carriers (ILECs), which receive subsidies to expand connectivity infrastructure within the United States.
The United States alleged that between 2008 and 2023, five ILECs owned by Armstrong Group—Armstrong Telephone Company – Maryland, Armstrong Telephone Company – New York, Armstrong Telephone Company – Northern Division, Armstrong Telephone Company – Pennsylvania, and Armstrong Telephone Company – West Virginia—failed to comply with FCC regulations governing what costs they were allowed to report for purposes of claiming subsidy payments from the government. As a result, these companies received greater subsidy payments than those they were entitled.
“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,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “Today’s settlement demonstrates our continuing commitment to protect the integrity of the FCC’s operations and services.”
“When providers like the Armstrong Group fail to follow federal law and FCC regulations, they jeopardize not only critical government programs but also consumers’ ability to access a modern lifeline — rapid, reliable, and efficient telecommunications services,” said U.S. Attorney Eric G. Olshan for the Western District of Pennsylvania. “Today’s settlement demonstrates our office’s dedication to ensuring the business community plays fairly with respect to public funds and further assures our rural neighbors throughout the district that we will work vigorously to protect their access to essential services that many people take for granted.”
“In this digital age, it is critical for everyone everywhere to have access to reliable high-speed broadband,” said General Counsel Michele Ellison for the FCC. “That is why we are laser-focused on pursuing waste, fraud, and abuse in these critical programs and ensuring that available funds flow only to companies that play by the rules.”
“Carriers receiving support from USF or any FCC benefit program must understand that actions undermining claims processes will not be tolerated,” said Inspector General Fara Damelin of FCC.
Contemporaneous with this civil settlement, Armstrong Group has entered into a corporate compliance agreement with FCC requiring concrete changes in internal controls alongside comprehensive oversight mechanisms.
This civil settlement includes resolving claims brought under qui tam or whistleblower provisions of False Claims Act by James Ranko—Armstrong Group's former Controller. Under these provisions private parties can file actions on behalf of United States receiving portions of any recovery amounts; Ranko will receive $1.267 million as his share.
Resolution was achieved through coordinated efforts among Justice Department's Civil Division Commercial Litigation Branch Fraud Section U.S Attorney's Office Western District Pennsylvania & FCC Inspector General Office supported by its General Counsel office.
Senior Trial Counsel Benjamin C Wei & Assistant U.S Attorney Paul E Skirtich handled matters while Investigative Attorneys Elliot Lowenstein & Peter Feinberg provided investigation support
Claims resolved via settlement remain allegations without determination liability
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