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Principles for Treating Entities under Investigation

Principles for Treating Entities under Investigation

The question of how to treat entities under investigation is complex and requires careful maintenance of program integrity; USAC’s duty to prevent waste, fraud and abuse; due process concerns; fundamental fairness toward program participants; and respect for the integrity of law enforcement investigations.

USAC’s initial approach was generally to defer action on funding commitments to any applicant where USAC was aware of an active law enforcement investigation concerning the activities of the applicant relating to the Schools and Libraries Program, or any of the service providers utilized by that applicant, for each funding year until the investigation was resolved. Moreover, upon becoming aware of an investigation involving a particular service provider, USAC’s initial approach was to defer action on funding commitments from any applicant that proposed to utilize that service provider.

USAC’s initial approach was also to deny all Funding Request Numbers (FRNs) that it determined were inconsistent with program rules, regardless of the pendency of a law enforcement investigation. In some instances, USAC provided a partial positive funding commitment to an applicant with multiple FRNs, if it determined that the program violations associated with the denied FRNs were not present with respect to the remaining FRNs.

USAC’s Decision

USAC denies all FRNs that it determines are inconsistent with program rules. With respect to the remaining FRNs – that is, ones that do not appear to present program violations prior to any USAC review – USAC will act as follows in situations in which there is a pending law enforcement investigation:

  1. USAC will defer action on funding commitments for any FRN where USAC is aware of an active law enforcement investigation directly related to that FRN (namely, an investigation relating to either the applicant or the service provider for activities arising out of that particular FRN, in that funding year). If USAC is aware that a law enforcement investigation is examining the conduct of a particular service provider with respect to multiple applicants, it will defer action on funding commitments for all FRNs involving that service provider for all applicants known to be within the scope of the investigation.
  2. USAC may seek further guidance from the FCC with respect to such situations if it believes, after subjecting the FRN(s) to heightened scrutiny, tailored to the nature of the allegations, that there is no evidence of program violations with respect to the FRN(s).
  3. For FRNs involving service providers other than the one under investigation, USAC will issue positive funding commitments if it determines, after subjecting those requests to more intensive review, tailored to the nature of the allegations, that the service providers for those FRNs are not implicated in the issues under investigation, and the applicant and those service providers have fully complied with all program rules for those FRNs.
    1. Example: If an applicant submits an application with three separate FRNs for telecommunications services, Internet access, and eligible products and services, and USAC determines that the applicant has violated the FCC’s competitive bidding rules with respect to the procurement of the eligible products, USAC would deny the FRN for eligible products. If USAC determines, after subjecting the application to heightened scrutiny, tailored to the nature of the allegations, that there are no competitive bidding violations with respect to the requests for telecommunications service and Internet access, it would issue positive funding requests for those FRNs.
  4. When a service provider under investigation for conduct related to a particular applicant also is the service provider for an unrelated applicant, USAC will issue a positive funding commitment to the unrelated applicant (subject to the exceptions set forth in bullet 6) if it determines, after subjecting the application to more intensive review, tailored to the nature of the allegations, that the issues under investigation are not present with respect to the unrelated applicant.
    1. Example: If USAC is aware of an investigation relating to Service Provider X with respect to School Y in New York, and Service Provider X has been selected by other schools in Florida and Colorado, USAC will subject the applications from the schools in Florida and Colorado to heightened scrutiny to determine whether there is any evidence that Service Provider X has engaged in similar misconduct with respect to the Florida and Colorado schools. If the heightened scrutiny does not identify any evidence of such misconduct, then USAC would issue positive funding commitments to the schools in Florida and Colorado.
  5. In subsequent funding years, USAC will issue positive funding commitments (subject to the exceptions set forth in bullet 6) if it determines, after subjecting the application to heightened scrutiny, tailored to the nature of the allegations, that the issues under investigation are not implicated in the subsequent funding years.
    1. Example: If USAC is aware of an investigation relating to Service Provider X with respect to School District ABC in Kansas for Funding Year (FY) 2011, and School District ABC in Kansas reapplies for funding in FY2012, USAC will subject the funding requests for 2012 to heightened scrutiny, tailored to the nature of the allegations, to determine whether there is any evidence of misconduct relating to FY2012. If, for instance, School District ABC selected a different service provider for FY2012, or the relevant officials alleged to be part of the misconduct with respect to FY2011 are no longer associated with the applicant, those would be factors to consider.
  6. If FRNs associated with an entity that is known to be under an active law enforcement investigation pass all review procedures (bullets 4 and 5 above), USAC will issue funding commitments for those funding requests, despite the law enforcement investigation, subject to the following exceptions:
    1. If USAC is aware that the law enforcement investigation is at an advanced stage, for example, in plea negotiations, USAC will defer action on the funding commitment.
    2. If USAC is aware that persons associated with the entity under investigation have been arrested or criminal charges have been made, USAC will defer action on the funding commitment.
  7. As noted, in all cases, USAC will subject the applications in question to a more intensive review, tailored to the nature of the allegations that it understands are under investigation.

The application review process may take a significant period of time for a number of reasons. Nothing here should be taken to indicate that in such circumstances the funding commitment is being affected by a law enforcement investigation.