The US Federal Communications Commission (FCC) has formally proposed a USD16,971,253 penalty for City Communications, Inc. after the telco falsely claimed millions of dollars of taxpayer subsidies. These subsidies were given in respect of services supplied to ineligible customers since March 2022. The case represents yet another example of lax controls surrounding telco subsidies including the Emergency Broadband Benefit Program (EBB) and its successor, the Affordable Connectivity Program (ACP). The FCC Notice of Apparent Liability for Forfeiture states:
From at least January 2022 through August 2023, City sought and received EBB and ACP funding for subscribers that were improperly enrolled in these programs. The Company enrolled these subscribers with fake or false identifying information by either using an address to which the purported subscriber had no connection or repeatedly using the same benefit qualifying person (BQP) to enroll multiple subscribers.
City Communications’ infringements include:
- Improperly claiming and receiving USD3.1mn in EBB and ACP funding.
- Breaking the federal wire fraud statute by submitting these reimbursement requests via interstate wires.
- Transferring subscriber benefits from one comms provider to another, in violation of ACP rules.
- Submitting misleading information to the FCC on several occasions and failing to comply with demands for information on other occasions.
The wire fraud infringements would have merited an even more severe penalty except that it has taken the FCC too long to exercise its powers and several months of violations must be excluded under the statute of limitations.
City was incorporated in the US state of Georgia during February 2014 and is a reseller of AT&T services including internet access and mobile phones. It has apparently provided EBB and ACP services to residents of Alabama, Arkansas, California, Florida, Georgia, Kentucky, Louisiana, Maryland, Michigan, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Wisconsin. However, the FCC does not know who currently owns City Communications. Its investigation did identify a series of questionable transfers of money between City Communications and various other telcos run by the same group of people.
The abuses of government subsidies were flagrant.
…from December 10, 2021 through July 29, 2022, City Communications enrolled 1,837 subscribers in Oklahoma and Texas using only four nonsubscriber BQPs — 28 subscribers used BQP A, 778 subscribers used BQP B, 37 subscribers used BQP C, and 994 subscribers used BQP D. In the case of a non-subscriber BQP, that person is someone in the applicant’s household other than the applicant — often times a dependent child. Often, City Communications used the same non-subscriber BQP to enroll multiple subscribers on the same day; for example:
- on December 25, 2021, non-subscriber BQP D was used to enroll 30 subscribers,
- on January 13, 2022, non-subscriber BQP D was used to enroll 82 subscribers, and
- on May 15, 2022, non-subscriber BQP D was used to enroll 45 subscribers.
Incredibly, the FCC does not proactively look for telltale signs of fraud.
Of the 1,837 subscribers City Communications enrolled in 2021 and 2022 using only four non-subscriber BQPs, the Bureau’s analysis showed there were only 957 unique addresses used for the 1,837 subscribers.
The fraud was obvious but the FCC’s investigation was pathetic.
The Bureau also attempted to contact more than 200 purported City Communications subscribers via email. Only one subscriber responded…
The FCC has no problem with spending government money but cannot tell you the address of people who received it.
City Communications repeatedly used 300 Village Center Drive, Suite 103, Woodstock, GA 30188 on all required forms submitted to the FCC. When the Bureau attempted to serve the LOI [letter of enquiry], it was mailed to the foregoing address via first class and certified mail on September 16, 2022. On October 3, 2022, the first class mail was returned as “return to sender, not deliverable as addressed, unable to forward.”
Philosopher George Santayana observed “those who cannot remember the past are condemned to repeat it”. That quote is over a hundred years old, but I am forced to conclude that a goldfish is better able to retain facts than some American fraud managers working today, given the decade of US telecoms subsidy abuses reported by Commsrisk here, here, here, here and here.
One basic staple of fraud prevention is to know your customer, but the USA has a chronic problem with KIT: knowing its telcos. Nobody takes responsibility for knowing who owns those telcos, who runs them, where they are located or what they do. This encourages all sorts of unlawful activity, but the FCC does not even proactively confirm the identity of the telcos it is supposed to regulate whilst handing them large amounts of public money. The lack of interest in basic crime prevention will result in many more stories about fraud in the future.
