Three FCC Commissioners Take Issue With Notice Warning Against USF Abuse
The FCC reminded all eligible telecommunications carriers receiving support from the USF’s high-cost program they must follow agency rules and face sanctions if they don't. Commissioner Ajit Pai complained that the FCC had “turned a blind eye” to such conduct for too long by Hawaii’s Sandwich Isles Communications, a company whose former owner, Albert Hee, was convicted of tax violations in July. Commissioners Mignon Clyburn and Mike O’Rielly said in a joint statement that Monday’s public notice doesn't go far enough.
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The FCC said in the notice its rules apply equally to those compensated through the legacy high-cost program support or Connect America Fund support. Fund recipients must use support only for “its intended purposes of maintaining and extending communications service to rural, high-cost areas of the nation,” the FCC said. “Expenditure of legacy high-cost or Connect America support for any other purpose is misuse and may subject the recipient to recovery of funding, suspension of funding, enforcement action by the Enforcement Bureau … and/or prosecution under the False Claims Act.”
“We remain concerned that certain expenses not related to the provision of service, such as for artwork and cafeterias, may oddly be permitted under certain readings of our rules,” Clyburn and O’Rielly said. “These decades-old precedents, created under very different circumstances, must be realigned to reflect the Commission’s more recent reforms.” They want a proceeding to address the issue in the coming months.
Pai zeroed in on the alleged Sandwich Isles abuses. “There’s no question that the American people should not be expected to pay for the ‘personal travel,’ ‘entertainment,’ ‘alcohol,’ and ‘personal expenses of ... family members of employees and board members of telecommunications carriers,’” Pai said. But the FCC tolerated bad behavior for far too long by the company and Hee, he said.
Hee, former owner of Sandwich Isles’ parent company, Waimana Enterprises, used the company as “his family’s personal piggy bank,” Pai said. The company “apparently paid $96,000 so that Hee could receive two-hour massages twice a week; $119,909 for personal expenses, including family trips to Disney World, Tahiti, France, and Switzerland and a four-day family vacation at the Mauna Lani resort,” Pai said. A federal court in July convicted Hee of charges he filed false tax returns from 2007 to 2012.
“For five years, we’ve known of Hee’s penchant for self-dealing and skill at pocketing taxpayer dollars,” Pai said. “I hope my colleagues will agree that a full investigation of Sandwich Isles and its untoward finances is in order, along with immediate action to recover whatever funds we can for the American taxpayer. It is time for the taxpayer-funded party to end.” Sandwich Isles and Hee did not comment by our deadline.