Enforcement, Investigations & Audits

E-Rate fraud is back in the spotlight following the indictment of a Dallas charter school CEO and the owner of a contracting company for an alleged kickback scheme resulting in over $300,000 in illegal subsidies. Federal prosecutors stated that the pair violated the E-Rate program’s competitive bidding requirements and submitted fraudulent invoices to the Federal Communications Commission (“FCC”).  The indictment comes on the heels of major FCC settlements and enforcement actions against educational institutions and service providers for alleged E-Rate violations.  FCC Chairman Pai has repeatedly criticized the administration of the E-Rate program and the indictment may spur further calls for action to combat fraud in the program.

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The NY Chapter of the Federal Communications Bar Association (FCBA) held a “Meet and Greet” with FCC Commissioner Michael O’Rielly yesterday in Kelley Drye’s New York office.  Jameson Dempsey, a Kelley Drye associate and co-chair of the NY FCBA Chapter, provided introductory remarks. John Heitmann, Chair of the Communications Practice group in Kelley Drye’s Washington

Stressing the importance of receiving truthful and accurate information, the Federal Communications Commission (“FCC”) reached a $1.7 million settlement with inmate calling services provider Securus Technologies, Inc. and related entities (“Securus”) to resolve allegations that Securus submitted misleading information to the FCC in support of a pending transfer of control.  Although the settlement cleared the way for the transfer’s approval, the FCC held up the deal for months while it investigated statements made by Securus representatives.  As a result, the FCC’s action supports the adage that “haste often makes waste” in telecommunications-related deals and that submitting misleading information to the FCC can come with significant consequences.


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Continuing its assault on unlicensed broadcast operations, the Federal Communications Commission (“FCC”) issued a unanimous Notice of Apparent Liability for Forfeiture (“NAL”) at its September meeting proposing the statutory maximum fine of $144,344 against a pirate radio operator as well as the owners of the property housing the unlicensed station.  The action represents the first time the FCC has found landowners apparently liable for pirate radio operations on their property and the first Commission-level NAL issued against a pirate radio operation.  Imposing penalties on property owners that support pirate operations has been a longstanding goal for Commissioner O’Rielly, and Chairman Pai signaled that cracking down on pirate stations remains a key enforcement priority for the FCC.

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As part of its August 2017 Open Meeting, the Federal Communications Commission (“FCC”) issued a Notice of Apparent Liability for Forfeiture (“NAL”) proposing over $82 million in fines against Philip Roesel and the insurance companies he operated for allegedly violating the Truth in Caller Act by altering the caller ID information (a/k/a “spoofing”) of more than 21 million robocalls in order to generate sales leads and avoid detection by authorities.  The FCC separately issued a Citation against Mr. Roesel and his companies for allegedly violating the Telephone Consumer Protection Act by transmitting the robocalls to emergency, wireless, and residential phone lines without consent.  The NAL and Citation represent just the latest salvos in the FCC’s continuing assault on robocalling in general and deceptive uses of spoofing in particular.  With $200 million in proposed fines in only two cases, it is clear that such issues will remain an enforcement priority under Chairman Pai.

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On July 26, 2017, the Federal Communications Commission (FCC or Commission) released the text of the Forfeiture Order adopted at the Commission’s July 2017 open meeting against Dialing Services, LLC for enabling unauthorized prerecorded message calls (a/k/a “robocalls”) by third parties to wireless phones in violation of the Telephone Consumer Protection Act (TCPA).  The Forfeiture Order is significant for a number of reasons – not the least of which was Republican Commissioner Michael O’Rielly’s strong dissent questioning the action’s legal and policy bases.  This marks the first time that the FCC has imposed liability on a company that enables robocalling campaigns by third parties, even when the company does not directly create the robocall messages or direct who will receive the robocalls.  Moreover, the Commission’s use of a different (and arguably lesser) standard than the “high degree of involvement” standard applicable to fax broadcaster liability could trigger a new wave of litigation for calling platform vendors and other applications that enable or permit mass calling or texting.

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When Ajit Pai was a Commissioner, he was a frequent critic of the FCC’s enforcement practice.  Now that Chairman Pai has led the FCC for six months, his approach to enforcement is coming into better focus.  In this episode of Kelley Drye’s Full Spectrum podcast, Kelley Drye enforcement attorneys Steve Augustino and Brad Currier discuss

Below is Kelley Drye’s preview of the items under consideration at the Federal Communication Commission’s (FCC’s or Commission’s) upcoming monthly Open Meeting, to be held on August 3, 2017. Consistent with the trend since he took over the Commission, Chairman Ajit Pai continues to schedule a large number of items.  Indeed, for the seventh month in a row, the Commission has six or more items on its agenda.  This month, the agenda consists of eight items and has several items taking concrete steps to resolve proceedings or important questions presented to the Commission.  The areas covered skew heavily toward broadband deployment, with a CAF Phase II item, a Mobility Fund item and several spectrum items.  In addition, the Commission again has enforcement items on the agenda:  one (unidentified) item on the regular agenda and a one-item consent agenda involving an additional (unidentified) enforcement action.

The most significant agenda items are summarized below. Note: these brief summaries are based on draft items, which may differ from the final items released following the Open Meeting.  Please check with Kelley Drye after the meeting for more information on the items below.


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Commissioner Michael O’Reilly called for stronger enforcement action to combat unauthorized “pirate” radio broadcasters in a statement before the Communications and Technology Subcommittee of the House Energy and Commerce Committee on July 25, 2017.  The Commissioner’s recommendations came during the Subcommittee’s hearing on draft legislation to reauthorize the Federal Communications Commission (“FCC”).  While the reauthorization bill does not focus on pirate enforcement and the issue normally is seen as non-controversial, it is a longstanding priority for the Commissioner.  In his statement, Commissioner O’Rielly not only advocated for increased fines against pirates, but also penalties against third parties that support pirates, such as building owners housing pirate stations or pirate station advertisers.  While it remains unlikely that the recommendations will result in near-term legislative action, Commissioner O’Rielly’s statement sends a clear message that pirate broadcasters and their supporters remain in his enforcement crosshairs.

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At its July 2017 Open Meeting, the Federal Communications Commission (“FCC”) adopted a Notice of Proposed Rulemaking (“NPRM”) designed to strengthen and expand consumer protections against “slamming” and “cramming.” Slamming is the unauthorized change of a consumer’s preferred service provider, while cramming is the placement of unauthorized charges on a consumer’s telephone bill.  As we reported in our Open Meeting preview, slamming and cramming represent a major source of consumer frustration and a common focus of recent FCC enforcement actions. The NPRM is the agency’s first attempt in five years to strengthen the rules around slamming and cramming – and is the first attempt to specifically define cramming in its rules.  Moreover, the agency asks whether these rules should apply to wireless carriers (especially prepaid wireless) and to VoIP providers, potentially expanding the reach of the rules significantly.  Wireless carriers and interconnected VoIP providers should therefore pay close attention to the potential compliance obligations and marketing restrictions proposed in the NPRM.

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