Telecommunications

Texas Businessman Settles Allegations of E-Rate Program Fraud for $400,000

August 8, 2013 | Greene LLP

On Tuesday, the U.S. Department of Justice announced a $400,000 settlement with Texas businessman Larry Lehmann to resolve allegations that he violated the federal False Claims Act in connection with the Federal Communications Commission’s E-rate Program while acting as the CEO and managing partner of Acclaim Professional Services (“Acclaim”).

The Schools and Libraries Program of the Universal Service Fund is commonly known as the E-rate Program and was created by Congress as part of the Telecommunications Act of 1996. The program helps schools and libraries in the United States obtain affordable Internet access and internal networking by subsidizing eligible equipment and services. The Houston Independent School District (“HISD”) applied for and received E-rate subsidies for two years, from 2004 until 2006. Over this two-year period, Acclaim partnered with other companies to provide E-rate funded equipment and services to HISD.

United States ex rel. Richardson and Gillis v. Lehmann was initiated by two whistleblowers that had previously bid for contracts with HISD and the Dallas Independent School District (“DISD”). The government intervened in the suit and alleged that Lehmann violated the E-rate program’s competitive bidding requirements and HISD’s procurement rules by providing gifts such as tickets to sporting events to school district employees, and loans totaling $66,750 to an employee of the school district that was involved in the procurement and administration of HISD’s E-rate projects. The suit additionally alleged that Lehmann developed a scheme where HISD outsourced some of its employees to Acclaim, allowing them to continue to work for the school district while passing the cost on to the E-rate Program. Acclaim then allegedly disguised the cost of these employees by billing them as eligible goods and services in its E-rate program invoices.

Telecommunications Company Accused of Fraudulently Receiving $45 Million Government Grant to Provide Internet Service

July 3, 2013 | Greene LLP

On Friday, a federal judge denied a motion to dismiss a whistleblower’s qui tam complaint that alleged that Bluebird Network LLC (“Bluebird”) violated the federal False Claims Act when it fraudulently received a $45 million grant from the government to provide broadband service to underserved areas and when it subsequently terminated the whistleblower as an act of retaliation for voicing his concerns regarding the alleged violation. In denying the motion to dismiss, the judge emphasized that the relator had provided sufficient information and detail for each of his allegations.

Relator Martin Schell was employed by Bluebird as the Vice President of Business Development starting in October 2010, and later as the Vice President of Operations until he was terminated in January 2011. In his complaint, Schell alleged that the company knowingly made false statements to the National Telecommunications and Information Administration (“NTIA”), an agency of the U.S. Department of Commerce, in order to gain a $45 million grant from the American Reinvestment Recovery Act Broadband Technology Opportunities Program. The broadband program is part of the 2009 stimulus package, enacted to promote economic development in rural communities with limited or no access to broadband internet.

Schell’s complaint alleges that Bluebird falsely represented that northern Missouri was an underserved area, even though there are a “plethora” of service providers in the area. The complaint also alleges that in order to satisfy one condition of the government grant, Bluebird provided a letter that was executed as a “personal favor” from a local bank despite the bank having no intention of supplying the funds. Schell’s complaint also contends that Bluebird falsely maintained that it had satisfied a grant condition of receiving an in-kind contribution from the State of Missouri when it had in fact received such contribution from the state through a separate transaction, in exchange for internet service below market value.

T-Mobile Ordered to Pay Whistleblower $345,000 for Retaliation

August 10, 2012 | Greene LLP

The U.S. Department of Labor has ordered T-Mobile USA, the Washington-based cellphone company, to pay more than $345,000 to a whistleblower who raised concerns that international business customers were being fraudulently charged for roaming outside of the network. Although the Labor Department has not specified the exact amount by which customers were overcharged, it has confirmed that the damages reached into the millions. The government investigation was led by OSHA’s Seattle office, and found that T-Mobile terminated the whistleblower in retaliation for reporting the concerns of fraud in violation of the Sarbanes-Oxley Act, a corporate accountability statute passed by Congress in 2002. The charges T-Mobile has been ordered to pay include $244,479 in back wages and interest, $65,000 in punitive damages, and $36,493 in attorney’s fees. T-Mobile has been ordered to reinstate the employee and train its other workers on the whistleblower provisions in Sarbanes-Oxley. T-Mobile is expected to appeal the Labor Department’s order.

In addition to mandated whistleblower programs under the purview of various government agencies, whistleblowers may file suit under the False Claims Act (“FCA”). The FCA is a federal statute with qui tam provisions that allow relators (i.e., whistleblowers) to file civil claims on behalf of the government for fraud. A person is liable under the FCA for submitting a false claim to the government, either to obtain payment or to reduce or eliminate a liability owed to the government. As is true for most agency-based whistleblower programs, the False Claims Act contains robust provisions which protect whistleblowers against retaliation from their employees. Any contractor, agent, or employee who makes lawful efforts to stop a violation of the FCA may file suit under the anti-retaliation provisions, even if the whistleblower has not filed an FCA claim.

After a relator files a claim, the government reviews the allegations in the complaint and determines whether or not to intervene in the litigation. Even if the government declines to intervene, however, a relator may proceed with his or her private claims. Victorious relators stand to recover between 15% and 30% of any final judgment or settlement. Whistleblower suits under the False Claims Act have proven remarkably successful at rooting out fraud against the government, with total recoveries expected to exceed $8 billion for the year 2012 alone.