Armstrong Group to Pay $6.5M in False Claims Settlement with DOJ

Butler, Pennsylvania-based Armstrong Group has agreed to pay $6.5 million to settle allegations of violating the False Claims Act in relation to the Federal Communications Commission's (FCC) High-Cost Program. The settlement, announced on Friday, July 12, 2024, resolves claims that the company knowingly submitted improper costs to inflate subsidies received from the federal Universal Service Fund (USF).

The U.S. Department of Justice alleged that between 2008 and 2023, five incumbent local exchange carriers (ILECs) owned by Armstrong Group failed to comply with FCC regulations governing cost reporting for subsidy claims. As a result, these companies reportedly received higher subsidy payments than they were entitled to under the High-Cost Program.

The High-Cost Program, part of the USF, aims to ensure that consumers in rural, insular, and high-cost areas have access to modern communications networks at rates comparable to urban areas. It provides federal funds to qualified eligible telecommunications carriers to expand connectivity infrastructure within the United States.

Principal Deputy Assistant Attorney General Brian M. Boynton emphasized the importance of compliance with FCC rules for telecommunications providers participating in such programs. U.S. Attorney Eric G. Olshan for the Western District of Pennsylvania stressed that failures to follow federal law and FCC regulations jeopardize critical government programs and consumers' access to essential telecommunications services.

The settlement also includes a qui tam provision, with James Ranko, Armstrong Group's former Controller, receiving $1,267,500 as his share of the recovery for bringing the claims under the whistleblower provisions of the False Claims Act.

In addition to the financial settlement, Armstrong Group has entered into a corporate compliance agreement with the FCC. This agreement requires the company to implement concrete changes in internal controls and comprehensive oversight and monitoring mechanisms.

FCC General Counsel Michele Ellison and Inspector General Fara Damelin both emphasized the importance of pursuing waste, fraud, and abuse in these critical programs to ensure that funds flow to companies that adhere to the rules.

The resolution was the result of a coordinated effort between the Justice Department's Civil Division, the U.S. Attorney's Office for the Western District of Pennsylvania, and the FCC's Office of Inspector General, with assistance from the FCC's Office of General Counsel.

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