Alaska DigiTel owner settles suit for $1.6M

Posted: Wednesday, February 23, 2011

ANCHORAGE — The owner of Alaska DigiTel has paid nearly $1.6 million to settle allegations that the company signed up subscribers who did not qualify for a low-income federal subsidy of telecommunications service.

The money was paid by parent company General Communication Inc. for false claims submitted by Alaska DigiTel from January 2004 through August 2008, the Justice Department announced.

“We simply won’t tolerate practices that misuse taxpayer dollars and undermine the integrity of important government programs aimed at helping the needy,” said Tony West, assistant attorney general for the Justice Department’s Civil Division.

By submitting false claims to the Low Income Support Program, he said, Alaska DigiTel tried to take advantage of the program designed to help individuals who otherwise could not afford phone service.

Charles Miller, a spokesman for the Justice Department Civil Division, said no other telecoms have been accused of signing up unqualified people for the program.

GCI spokesman David Morris said Tuesday the company acquired an 80 percent, non-management stake of Alaska DigiTel in 2006. Two years later, GCI acquired the remainder and assumed day-to-day operations and management.

“GCI inherited this with the acquisition of Alaska DigiTel in August of 2008,” Morris said. “When we became aware of the allegations from the Department of Justice, we cooperated with the investigation to preserve the process.”

Morris acknowledged the settlement was substantial.

“We consider $1.6 million a lot of money, but you have to look at it from the business side, that protracted investigations with attorneys — it gets to be a very expensive and distracting activity,” he said. “When we did the benefit cost, this seemed to be the best way to conclude the matter so that we can continue.”

GCI put new procedures in place, instituted safeguards and implemented ongoing training to make sure no future problems occur, Morris said.

It was unclear just how much the alleged false claims totaled.

However, the government in negotiating a settlement is entitled to seek triple damages, Miller said. It does not matter whether the false claim was committed intentionally or by negligence.

“The fact remains that there has been fraud committed against the United States,” he said.

A whistleblower who reported that Alaska DigiTel was signing up unqualified subscribers will receive $260,000 from the settlement. Miller said the whistleblower was not an employee of Alaska DigiTel.

The Low Income Support Program paid Alaska DigiTel for free or discounted phone or wireless services for the needy.

Support for low-income consumers is one of four programs within the Universal Service Fund created by the Federal Communications Commission to ensure phone coverage throughout the country.

Other programs subsidize communications to rural users, health facilities and schools and libraries. Telecommunication companies pay into the fund from earnings from interstate business.

Alaska-based GCI provides voice, video and data communication services to residential, commercial and government customers. It claims a 45 percent share of the state’s long-distance market.

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