**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | *  | File No. EB-07-IH-3985       |
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| VCI Company                      | ** | NAL/Acct. No. 200732080033   |
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| Apparent Liability for           | *  | FRN No. 0015783004           |
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**NOTICE OF APPARENT LIABILITY FOR FORFEITURE AND ORDER**

Adopted: August 14, 2007 Released: August 15, 2007

By the Commission:

# INTRODUCTION

1.  In this *Notice of Apparent Liability for* Forfeiture ("*NAL*"), we
    find that VCI Company ("VCI") apparently violated sections 54.407(c)
    and 54.413(b) of the rules of the Federal Communications Commission
    ("Commission") by willingly or repeatedly failing to keep and
    provide to the Universal Service Administrative Company ("USAC")
    accurate records of the revenues it was forgoing in providing
    Lifeline and Link Up service.[^1] In addition, we find that VCI
    apparently violated sections 54.407(b) and 54.413(a) of the
    Commission's rules by willfully or repeatedly receiving duplicate
    reimbursement for qualifying low-income consumers served.[^2] Based
    on our review of the facts and circumstances surrounding this
    matter, we find that VCI is apparently liable for a total forfeiture
    of \$1,047,500. Furthermore, we order VCI to submit within 30 days
    to USAC revised Form 497s excluding all requests for duplicate
    universal service reimbursement for qualifying low-income customers
    served from August 2004 to August 2007.[^3]

# BACKGROUND

2.  Under section 254 of the Communications Act of 1934, as amended (the
    "Act"), Congress promoted access to telecommunications service for
    all consumers and required the Commission to establish rules
    governing the services to be supported by the Federal universal
    service fund support mechanisms.[^4] Section 254(b) establishes
    principles upon which the Commission must base its policies for the
    preservation and advancement of universal service. One of these
    principles states that "consumers in all regions of the Nation,
    including low-income consumers..., should have access to
    telecommunications and information services ... that are reasonably
    comparable to those services provided in urban areas and that are
    available at rates that are reasonably comparable to rates charged
    in urban areas."[^5] As we have stated previously, "these principles
    also recognize that ensuring rates are affordable is a national
    priority."[^6]

3.  The Commission implemented Part 54 of its rules in response to this
    statutory mandate and promulgated various universal service support
    mechanisms, including mechanisms providing financial support to
    schools and libraries, rural healthcare providers, and carriers
    providing service to high cost and low-income users.[^7] Under the
    low-income support mechanism, the Lifeline Assistance ("Lifeline")
    and Lifeline Connection Assistance ("Link Up") programs provide
    discounts to qualifying low-income consumers for basic telephone
    service.[^8] Lifeline provides low-income consumers with discounts
    off the monthly cost of telephone service for a single telephone
    line in their principal residence.[^9] In addition, qualifying
    low-income consumers have the option to elect at the initiation of
    service Toll Limitation Service ("TLS") to be included as part of
    Lifeline at no extra charge.[^10] Link Up provides qualifying
    low-income consumers with discounts from the initial costs of
    installing telephone service.[^11] The low-income mechanism allows
    an eligible telecommunications carrier ("ETC") providing services to
    qualifying low-income consumers to seek and receive reimbursement
    for revenues it forgoes as a result.[^12] In order for a carrier to
    receive low-income support, the carrier first must be designated as
    an ETC.[^13]

4.  As part of the framework for these programs, the Commission
    established explicit requirements that ETCs must meet to receive
    federal low-income support. Under sections 54.407 and 54.413 of the
    Commission's rules, an ETC may receive universal service support
    directly from USAC based on the number of qualifying low-income
    consumers it serves in the form of a reimbursement of the revenues
    it forgoes in providing Lifeline and Link Up services.[^14]
    Moreover, the Commission has established that low-income consumers
    may receive support only for "a single telephone line in their
    principal residence."[^15] In order to receive reimbursement for
    such support, an ETC "must keep accurate records of the revenues it
    forgoes in providing Lifeline...."[^16] The Commission's rules
    further require that "\[s\]uch records shall be kept in the form
    directed by \[USAC\] and provided to \[USAC\] at intervals as
    directed...."[^17] As a result, an ETC seeks reimbursement from USAC
    for the revenues it forgoes in provisioning Lifeline to qualifying
    low-income consumers by submitting a Form 497 for each state in
    which it seeks reimbursement and for each month in which it has
    forgone revenues.[^18]

5.  The Commission's rules governing reimbursement for Link Up services
    are very similar to those governing the Lifeline program. That is,
    to receive reimbursement for Link Up, an ETC must keep accurate
    records of the revenues it forgoes in reducing the customary charge
    for commencing telecommunications service and its records must be
    kept in the form directed by and provided to USAC.[^19] As with the
    Lifeline program, an ETC thus seeks reimbursement from USAC for the
    revenues it forgoes in provisioning Link Up by submitting a Form 497
    for each state and month.[^20]

6.  VCI is a privately held company that provides telecommunications
    services predominantly to low-income consumers.[^21] The company was
    incorporated in the State of Washington on November 24, 2003 and has
    operated or obtained authority to operate in 15 states.[^22] VCI has
    been certified as an ETC in all 15 states and thus qualifies for the
    receipt of low-income support directly from USAC. VCI currently
    provides Lifeline, Link Up and TLS services in twelve states,
    including Minnesota.[^23] VCI relinquished ETC status and ceased all
    telecommunications service operations in Washington on January 11,
    2007 and in Oregon on February 1, 2007.[^24] VCI provides services
    directly to end users using its own facilities as well as by
    reselling service initially provided by other carriers.[^25]

7.  In addition to federal low-income support, VCI is also eligible to
    receive state low-income support in states such as Minnesota,
    Oregon, and Washington that established their own programs providing
    additional support to low-income consumers in their states.[^26]
    Oregon and Washington have established their own state eligibility
    criteria for qualifying low-income consumers that resemble the
    federal low-income program, while Minnesota has adopted the federal
    criteria.[^27] ETCs such as VCI may participate in both the federal
    and state programs.

8.  In June 2006, USAC began an audit review of VCI's December 2005
    claims for federal low-income support in Oregon.[^28] During the
    audit, USAC informed VCI that it believed VCI was submitting
    duplicate requests for reimbursement of low-income support.[^29] VCI
    did not dispute USAC's finding or the Lifeline and Link Up duplicate
    line data underlying that finding. USAC ultimately found at the
    conclusion of the audit that in December 2005 VCI submitted a
    request for reimbursement for duplicate telephone numbers and
    addresses in Oregon for which it was not eligible.[^30]

9.  In or about August 2006, the Oregon Telephone Assistance Program
    ("OTAP"), the administrator of the Oregon state low-income programs,
    conducted an audit into VCI's submissions seeking Oregon state
    low-income support. The OTAP found that VCI submitted telephone
    numbers twice or even three times on the same monthly form seeking
    low-income support. In total, OTAP determined that VCI had submitted
    more than 1,800 duplicate requests for support in Oregon from June
    2004 through March 2006. As a result, OTAP denied the duplicate
    requests submitted by VCI.[^31] The OTAP administrator informed VCI
    of these findings by e-mail in August 2006[^32] and again in a
    November 2006 Staff Report.[^33] Following the OTAP inquiry, on
    December 8, 2006, the Oregon Public Utility Commission ("OPUC")
    opened a formal investigation into, among other things, VCI's
    duplicate billings for Oregon state low-income support.[^34] These
    duplicate billings apparently were also included in VCI's claims for
    federal low-income support.[^35] Despite the multiple inquiries from
    state and federal regulatory agencies seeking information about its
    submissions for low-income support, particularly its submission of
    duplicate requests for support to state and federal agencies, VCI
    has failed to revise any of the Form 497s filed with USAC to account
    for its duplicate low-income support requests.

10. On May 25, 2007 and July 3, 2007, the Enforcement Bureau ("Bureau")
    sent Letters of Inquiry to VCI inquiring into the company's claims
    for low-income support, primarily in Minnesota, Oregon, and
    Washington.[^36] VCI submitted its responses to the Bureau inquiry
    letters on June 13, 2007,[^37] June 21, 2007[^38] and July 12,
    2007.[^39] VCI's responses demonstrate that in Minnesota, Oregon and
    Washington the company received reimbursement to which it was not
    entitled by including duplicate telephone numbers and addresses in
    the total line counts for Lifeline, Link Up, and TLS support on Form
    497s submitted to USAC.

11. Under section 503(b)(1) of the Act, any person who is determined by
    the Commission to have willfully or repeatedly failed to comply with
    any provision of the Act or any rule, regulation, or order issued by
    the Commission shall be liable to the United States for a forfeiture
    penalty.[^40] Section 312(f)(1) of the Act defines willful as "the
    conscious and deliberate commission or omission of \[any\] act,
    irrespective of any intent to violate" the law.[^41] The legislative
    history to section 312(f)(1) of the Act clarifies that this
    definition of willful applies to both sections 312 and 503(b) of the
    Act[^42] and the Commission has so interpreted the term in the
    section 503(b) context.[^43] The Commission may also assess a
    forfeiture for violations that are merely repeated, and not
    willful.[^44] "Repeated" means that the act was committed or omitted
    more than once, or lasts more than one day.[^45] To impose such a
    forfeiture penalty, the Commission must issue a notice of apparent
    liability and the person against whom the notice has been issued
    must have an opportunity to show, in writing, why no such forfeiture
    penalty should be imposed.[^46] The Commission will then issue
    forfeiture if it finds by a preponderance of the evidence that the
    person has violated the Act or a Commission rule.[^47]

12. We conclude under this standard that VCI is apparently liable for a
    forfeiture for its apparent willful or repeated violations of
    sections 54.407(b), 54.407(c), 54.413(b) and 54.413(a) of the
    Commission's rules by filing inaccurate Form 497s with USAC seeking
    duplicate low-income support reimbursement and as a result receiving
    low-income support to which it was not entitled. Based on a
    preponderance of the evidence, we find that VCI engaged in a
    consistent and sustained practice of submitting duplicate requests
    for reimbursement to USAC and that it consequently received
    significant support to which it was not entitled. We therefore
    propose a forfeiture in the amount of \$1,047,500 against VCI for
    these apparent violations.

# DISCUSSION

## VCI Apparently Violated Sections 54.407(c) and 54.413(b) of the Commission's Rules By Submitting Inaccurate Information To USAC

13. The record establishes that VCI failed to maintain accurate records
    of revenues it was forgoing, as evidenced by its repeated submission
    of Form 497s that contained duplicate ineligible requests for
    reimbursement. Moreover, based on the evidence developed in this
    investigation, we determine that VCI included thousands of duplicate
    entries in the total line counts for Lifeline, Link Up, and TLS
    support on its Form 497 submissions from October 2005 through March
    2007 to USAC for service provided in Minnesota, Oregon, and
    Washington.[^48] Consequently, VCI received excessive monthly
    low-income reimbursements continuing from November 2005 until April
    2007.[^49]

14. VCI does not dispute the violative, erroneous submissions, but
    instead merely blames them on a faulty computer system.[^50]
    Specifically, VCI claims that when culling data for submissions to
    USAC, its system captured only the low-income customer's social
    security number and failed to eliminate any duplicate customer
    telephone numbers or addresses. As a result, when VCI collected
    information about its eligible consumers for its Form 497
    submissions to USAC, it included duplicate requests for
    reimbursement.[^51] Because reimbursement of low-income support is
    limited to revenues that VCI was forgoing in provisioning a single
    telephone line per principal residence for each qualified low-income
    consumer, VCI is required to eliminate duplicate entries, including
    duplicate telephone numbers or addresses, in seeking full
    reimbursement for the qualified customer on each Form 497. VCI
    admits that "utilizing two additional customer identifiers,
    telephone number and address"[^52] in the system in addition to the
    social security number would allow the company to identify these
    inaccuracies. VCI failed to implement such a compliance measure,
    however, and continued its conduct in spite of the State of Oregon's
    and USAC's investigations beginning in or around August 2006 of its
    practices, and actions by both regulatory authorities to disallow or
    require repayment of low-income support.[^53] VCI did not correct
    this faulty system until May 2007.[^54] Accordingly, we conclude
    that VCI apparently willfully or repeatedly violated sections
    54.407(c) and 54.413(b) by filing inaccurate Form 497s with USAC
    between October 2005 and November 2006 for its service in Oregon and
    Washington and by filing inaccurate Form 497s with USAC between
    December 2005 and March 2007 for its service in Minnesota.

## VCI Apparently Violated Sections 54.407(b) and 54.413(a) By Collecting Lifeline and Link Up Support To Which It Was Not Entitled

15. VCI admits that it received duplicate reimbursement from November
    2005 through April 2007[^55] for the same telephone number or
    address on thousands of lines provisioned in Minnesota, Oregon, and
    Washington. From November 2005 through December 2006, VCI received
    support for 8,217 Lifeline and 2,050 Link Up duplicate telephone
    numbers or addresses for service in these states.[^56] After VCI
    ceased providing service in Oregon and Washington, VCI continued to
    receive reimbursement of Lifeline support for another 448 duplicate
    telephone numbers or addresses from January 2007 through April 2007
    for service in Minnesota alone.[^57] VCI has neither attempted to
    return the excess reimbursements to USAC, nor explained its failure
    to do so. Accordingly, we conclude that VCI apparently willfully or
    repeatedly violated section 54.407(b) by collecting reimbursements
    each month from November 2005 through December 2006 for Lifeline
    support in Oregon and Washington and by collecting reimbursements
    each month from January 2006 through April 2007 for Lifeline support
    in Minnesota. We also conclude that VCI apparently willfully or
    repeatedly violated section 54.413(a) by collecting reimbursements
    for Link Up support each month from November 2005 through December
    2006 in Oregon and Washington and each month from January 2006
    through December 2006 in Minnesota to which it was not entitled
    under our rules.

## Proposed Forfeiture

16. Section 503(b)(2)(B) of the Act authorizes the Commission to assess
    a forfeiture of up to \$130,000 for each violation or each day of a
    continuing violation, up to a statutory maximum of \$1,325,000 for a
    single act or failure to act.[^58] In determining the appropriate
    forfeiture amount, we consider the factors enumerated in section
    503(b)(2)(D) of the Act, including "the nature, circumstances,
    extent and gravity of the violation, and, with respect to the
    violator, the degree of culpability, any history of prior offenses,
    ability to pay, and such other matters as justice may require."

17. The Commission has not established a base forfeiture amount for the
    submission of inaccurate requests for universal service support in
    violation of sections 54.407(c) or 54.413(b) of our rules. We find
    that a significant forfeiture amount is appropriate. Administering
    the low-income program is an intensive undertaking that requires
    determining that each carrier seeking low-income reimbursement has
    met all of the Commission's requirements and submitted complete and
    accurate submissions. If an ETC ignores our rules and submits
    information that is consistently inaccurate, it undermines the
    low-income reimbursement mechanism and the universal service program
    altogether.

18. In this respect, an ETC's filing of inaccurate requests for
    low-income reimbursement is similar to a carrier's failure to
    provide accurate revenue information to USAC for the assessment of
    the carrier's universal service fund contributions. As with the
    universal service fund contributions cases, we set base forfeiture
    amounts here that reflect USAC's need to receive consistently
    accurate and reliable information from carriers. We have established
    \$50,000 as the base forfeiture amount for a carrier's failure to
    file accurate revenue information with USAC.[^59] Carriers provide
    that information in most cases on a quarterly basis via FCC Form
    499.[^60] A comparable amount should apply to the filing of
    inaccurate low-income reimbursement requests, adjusted to reflect
    the fact that ETCs file FCC Form 497 on a monthly basis.
    Accordingly, we establish \$20,000 per form as the base forfeiture
    amount for the filing of inaccurate requests for reimbursement under
    the low-income program, in violation of sections 54.407(c) and
    54.413(b) of the Commission's rules.

19. VCI admits it filed inaccurate Form 497s seeking reimbursement in
    Oregon and Washington from October 2005 through November 2006, and
    filed inaccurate forms seeking reimbursement in Minnesota from
    December 2005 through March 2007.[^61] VCI continued to submit these
    inaccurate reports in spite of state and federal regulatory
    investigations of its practices and regulatory actions to disallow
    or require repayment of low-income support. Moreover, VCI has
    steadfastly refused to refile or file revised requests for support
    that did not contain duplications.

20. The Commission has not previously determined whether an ETC's
    failure to file an accurate Form 497 is a continuing violation under
    section 503(b)(2)(B). We find that a carrier\'s failure to file an
    accurate form (or failure to file a form) has a continuing harmful
    impact on the Universal Service Fund and other related regulatory
    obligations. In this instance, VCI received and continued to benefit
    from excessive funds that USAC disbursed as a direct result of VCI's
    inaccurate form. We therefore conclude that VCI's failure to file
    accurate Form 497s constitutes a continuing violation as to which
    the one year statute of limitations for forfeiture in section
    503(b)(6)(B) does not begin to run until the violation is cured. We
    recognize that the Globcom Order suggested that the statute of
    limitations begins to run on the date a form was filed (or due) and
    bars a forfeiture issued more than one year later.[^62] We disagree
    with that finding. Nevertheless, because we are changing course in
    this order by finding a continuing violation for the failure to file
    accurate Form 497s, we exercise our prosecutorial discretion here
    and decline to propose forfeitures for VCI's failures to file Form
    497s more than one year prior to the date of the NAL. We caution VCI
    and other carriers that future enforcement actions may consider all
    failures to file forms with USAC, including Telecommunications
    Reporting Worksheets, as continuing violations subject to forfeiture
    action.

21. For the reasons discussed above, we conclude that VCI is apparently
    liable for a \$20,000 forfeiture for each inaccurate Form 497 filed
    within the past year. VCI submitted to USAC sixteen inaccurate Form
    497s from August 2006 through March 2007.[^63] Accordingly, we
    propose a \$320,000 forfeiture for VCI's sixteen apparent violations
    of sections 54.407(c) and 54.413(b) of the Commission's rules.

22. As with the provision of inaccurate information in requests for
    low-income reimbursements, the Commission has not established a base
    forfeiture for the unlawful receipt of Lifeline and TLS
    reimbursements in violation of section 54.407(b) of our rules. Once
    again, we find that a significant forfeiture amount is justified.
    Congress explicitly designated the provision of service to
    low-income consumers one of the key principles upon which the
    Commission should base its universal service policies.[^64] When an
    ETC receives Lifeline support to which it is not entitled, however,
    it undermines this national priority and ultimately threatens to
    deprive low-income consumers of the essential telecommunications and
    information services to which they are entitled.

23. In another context, when addressing carriers that fail to comply
    with recurring universal service contribution obligations, we have
    imposed significant forfeitures. Specifically, we have proposed a
    base forfeiture of \$20,000 for each month in which a carrier has
    failed to pay its USF contribution.[^65] We believe a similar
    approach is warranted here. In both cases, a carrier has unlawfully
    deprived the USF of funds at the expense of innocent third
    parties.[^66] We therefore find it appropriate to impose a \$20,000
    base forfeiture for each month in which an ETC, in violation of
    section 54.407(b), receives Lifeline support to which it is not
    entitled.

24. From November 2005 through April 2007, VCI admits that it received
    duplicate Lifeline and TLS reimbursement for 8,665 lines as a result
    of submitting duplicate telephone numbers, duplicate addresses and,
    in some cases, both.[^67] The Commission's rules allow an ETC to
    seek reimbursement from USAC for revenues it forgoes in providing
    services to low-income consumers but section 54.407(b) limits the
    amount of Lifeline support to "reimbursement for each qualifying
    low-income consumer served."[^68] VCI was thus precluded from
    obtaining reimbursement for a qualifying consumer more than once a
    month. Despite this restriction, as explained above, VCI received
    about \$114,000 in Lifeline and TLS support as reimbursement for
    services it did not provide. Each monthly receipt of excess support
    constitutes a continuing violation that continues until the ETC has
    returned the funds to USAC.[^69] VCI received excessive support in
    eighteen months from November 2005 continuing until April 2007. We
    propose a base forfeiture of \$360,000 for VCI's eighteen apparent
    violations of section 54.407(b).

25. Additionally, given the gravity of the harm here, we also find an
    upward adjustment is appropriate. In our USF contribution
    enforcement items, we upwardly adjust the forfeiture by one-half of
    the carrier's balance due to USAC.[^70] We conclude that imposing
    such an upward adjustment in this situation would adequately punish
    VCI for its actions at issue here as well as deter other ETCs from
    seeking excessive support. As we have repeatedly observed, such an
    upward adjustment of the forfeiture "illustrate\[s\] that a
    delinquent carrier's culpability and the consequential damage it
    causes to the goal of universal service may vary with the size of
    the contribution it fails to make."[^71] We find that it is equally
    important to consider the damage caused by an ETC's receipt of
    excessive support. Accordingly, we find that an upward adjustment
    representing one-half the excessive funds received is proper.
    Beginning November 2005 and continuing through the receipt of its
    reimbursement support from USAC in April 2007, VCI received
    \$114,000 in low-income Lifeline and TLS support to which it was not
    entitled as a result of seeking reimbursement for duplicate
    telephone numbers, addresses or both. Adding half of that amount to
    the proposed base forfeiture amount results in a total proposed
    forfeiture of \$417,000 for VCI's apparent violation of section
    54.407(b).

26. Finally, the Commission has also yet to establish a base forfeiture
    for the unlawful receipt of Link Up reimbursements in violation of
    section 54.413(a) of our rules. As above, we find that a significant
    forfeiture amount is justified. In another context, when addressing
    carriers that fail to comply with regulatory contribution
    obligations, we have imposed significant forfeitures. Specifically,
    we have proposed a base forfeiture of \$20,000 for each month in
    which a carrier has failed to pay its USF contribution.[^72] We
    believe a similar approach is warranted here. In both cases, a
    carrier has unlawfully deprived the USF of funds, at the expense of
    innocent third parties. We therefore find it appropriate to impose a
    \$20,000 base forfeiture for each month in which an ETC, in
    violation of section 54.413(a), receives Link Up support to which it
    is not entitled.

27. From November 2005 through December 2006, VCI admits that it
    received duplicate Link Up reimbursement for 2,050 lines as a result
    of submitting duplicate telephone numbers, duplicate addresses and,
    in some cases, both.[^73] The Commission's rules allow an ETC to
    seek reimbursement from USAC for revenues it forgoes in providing
    services to low-income consumers but section 54.413(a) limits the
    amount of Link Up support to "the difference between the carrier\'s
    customary connection or interest charges and the charges actually
    assessed to the participating low-income consumer."[^74] Moreover,
    our rules and orders have explicitly stated that low-income
    consumers may receive support only for a single telephone line in
    their principal residence.[^75] VCI was thus precluded from
    obtaining reimbursement for a qualifying consumer more than once.
    Despite this restriction, as explained above, VCI received about
    \$61,000 in Link Up support as reimbursement for services it did not
    provide. Each monthly receipt of excess support constitutes a
    continuing violation that continues until the ETC has returned the
    funds to USAC.[^76] VCI received excessive Link Up support for
    fourteen months from November 2005 continuing through December 2006.
    We therefore propose a base forfeiture of \$280,000 for VCI's
    fourteen apparent violations of section 54.413(a).

28. For the reasons stated in our discussion of VCI's apparent
    violations of section 54.407(b), we also propose an upward
    adjustment of one-half the amount of excess Link Up support received
    by VCI. Beginning November 2005 and continuing through the receipt
    of its reimbursement support from USAC in December 2006, VCI
    received approximately \$61,000 in Link Up support to which it was
    not entitled as a result of seeking reimbursement for duplicate
    telephone numbers, addresses or both. Adding half of that amount to
    the proposed base forfeiture amount results in a total proposed
    forfeiture of \$310,500 for VCI's apparent violation of section
    54.413(a).

# Conclusion

29. We conclude that VCI is apparently liable for the following proposed
    forfeitures: (1) \$320,000 for failure to file accurate form 497s of
    the revenues it was forgoing in providing low-income service; (2)
    \$417,000 for unlawful receipt of excessive reimbursement for
    Lifeline support; and (3) \$310,500 for unlawful receipt of
    excessive reimbursement for Link Up support. In sum, we hold that
    VCI is apparently liable for a total forfeiture of \$1,047,500.
    Further violations of the Commission's rules governing the filing of
    accurate information seeking reimbursement and receipt of low-income
    support will constitute additional violations subjecting VCI to
    possible increased enforcement action. Such enforcement action could
    take the form of higher forfeitures. In addition, the Commission may
    suspend support disbursements to an ETC or revoke the carrier's
    designation as an ETC upon evidence that indicates the carrier is no
    longer in compliance with the Commission's criteria for ETC
    designation.[^77]

30. We warn carriers that if the forfeiture methodologies described
    herein are not adequate to deter violations of our USF rules, our
    statutory authority permits the imposition of much larger penalties
    and we will not hesitate to impose them as circumstances require.

# ORDERING CLAUSES

31. ACCORDINGLY, IT IS ORDERED THAT, pursuant to section 503(b) of the
    Communications Act of 1934, as amended, 47 U.S.C. § 503(b), and
    section 1.80 of the Commission's rules, 47 C.F.R. § 1.80, that VCI
    is hereby NOTIFIED of its APPARENT LIABILITY FOR A FORFEITURE in the
    amount of \$1,047,000 for willfully or repeatedly violating the
    Commission's rules.

32. IT IS FURTHER ORDERED THAT, pursuant to section 1.80 of the
    Commission's Rules,[^78] within thirty days of the release date of
    this NOTICE OF APPARENT LIABILITY, VCI SHALL PAY the full amount of
    the proposed forfeiture or SHALL FILE a written statement seeking
    reduction or cancellation of the proposed forfeiture.

33. IT IS FURTHER ORDERED THAT, pursuant to sections 4(i) of the
    Act,[^79] and sections 54.407(c) and 54.413(b) of the Commission's
    rules,[^80] within thirty days of the release of this NOTICE OF
    APPARENT LIABILITY AND ORDER, VCI SHALL SUBMIT to USAC revised FCC
    Form 497s excluding all requests for duplicate universal service
    reimbursement for qualifying low-income customers served from August
    2004 to August 2007.

34. Payment of the forfeiture must be made by check or similar
    instrument, payable to the order of the Federal Communications
    Commission.  The payment must include the NAL/Acct. No. and FRN No.
    referenced above.  Payment by check or money order may be mailed to
    Federal Communications Commission, P.O. Box 358340, Pittsburgh, PA
    15251-8340.  Payment by overnight mail may be sent to Mellon
    Bank /LB 358340, 500 Ross Street, Room 1540670, Pittsburgh, PA
    15251.  Payment by wire transfer may be made to ABA
    Number 043000261, receiving bank Mellon Bank, and account
    number 9116229.

35. The response, if any, to this NOTICE OF APPARENT LIABILITY must be
    mailed to Hillary S. DeNigro, Chief, Investigations and Hearings
    Division, Enforcement Bureau, Federal Communications Commission, 445
    12^th^ Street, S.W., Room 4-C330, Washington, D.C. 20554 and must
    include the NAL/Acct. No. referenced above.

36. The Commission will not consider reducing or canceling a forfeiture
    in response to a claim of inability to pay unless the petitioner
    submits: (1) federal tax returns for the most recent three-year
    period; (2) financial statements prepared according to generally
    accepted accounting practices (GAAP); or (3) some other reliable and
    objective documentation that accurately reflects the petitioner's
    current financial status. Any claim of inability to pay must
    specifically identify the basis for the claim by reference to the
    financial documentation submitted.

37. Requests for payment of the full amount of this NOTICE OF APPARENT
    LIABILITY FOR FORFEITURE under an installment plan should be sent to
    Deputy Chief Financial Officer, Federal Communications Commission,
    Room 1-A637, 445 12th Street, S.W., Washington, D.C. 20554.[^81]

38. IT IS FURTHER ORDERED that a copy of this NOTICE OF APPARENT
    LIABILITY FOR FORFEITURE shall be sent by certified mail, return
    receipt requested, to B. Lynn F. Ratnavale, Lukas, Nace, Gutierrez &
    Sachs, 1650 Tysons Boulevard, Suite 1500, McLean, Virginia, 22102.

    FEDERAL COMMUNICATIONS COMMISSION

    Marlene H. Dortch

    Secretary

[^1]: 47 C.F.R. §§ 54.407(c) and 54.413(b).

[^2]: 47 C.F.R. §§ 54.407(b) and 54.413(a).

[^3]: Section 54.417 of the Commission's rules requires that eligible
    telecommunications carriers maintain records to document compliance
    with all federal and state requirements governing Lifeline and Link
    Up for three years. *See* 47 C.F.R. § 54.417(a).

[^4]: 47 U.S.C. § 254(a)(2).

[^5]: 47 U.S.C. § 254(b)(3).

[^6]: *Lifeline and Link Up*, Report and Order and Further Notice of
    Proposed Rulemaking, 19 FCC Rcd 8302, 8305, ¶ 3 (2004) ("*2004
    Lifeline Order*").

[^7]: *See generally* *Federal-State Joint Board on Universal Service,*
    Report and Order, 12 FCC Rcd 8776 (1997) ("*1997 Universal Service
    Order*").

[^8]: The Commission adopted Lifeline and Link Up prior to the passage
    of the Telecommunications Act of 1996 pursuant to its general
    authority under sections 1, 4(i), 201, and 205 of the Act. *See 1997
    Universal Service Order*, 12 FCC Rcd 8952-53, ¶ 341; *2004*
    *Lifeline Order*, 19 FCC Rcd at 8306, ¶ 4. *See also
    Telecommunications Act of 1996*, Pub.L. No., 104-104, 110 Stat. 56
    (1996).

[^9]: 47 C.F.R. § 54.401(a)(2); *1997 Universal Service Order*, 12 FCC
    Rcd at 8957, ¶ 341; *2004 Lifeline Order*, 19 FCC Rcd at 8306, ¶ 4.

[^10]: 47 C.F.R. § 54.401(a)(3); *1997 Universal Service Order*, 12 FCC
    Rcd at 8980, ¶ 385.

[^11]: *See* 47 C.F.R. § 54.411(a)(1).

[^12]: *See* 47 C.F.R. §§ 54.407, 54.413.

[^13]: 47 U.S.C. § 254(e) (providing that only ETCs designated pursuant
    section 214(e) of the Act, 47, C.F.R. § 214(e), are eligible to
    receive specific Federal universal service support); *see also* 47
    U.S.C. § 214(e) (setting forth the requirements for ETC
    designation).

[^14]: 47 C.F.R. §§ 54.407 and 54.413.

[^15]: *See 1997 Universal Service Order*, 12 FCC Rcd at 8957, ¶ 341;
    *2004 Lifeline Order*, 19 FCC Rcd at 8306, ¶ 4 (specifying that
    support for Lifeline subscribers is for "a single telephone line in
    their principal residence"). *See also* 47 C.F.R. § 54.411(a)(1)
    (stating that Link Up support is for "commencing telecommunications
    service for a single telecommunications connection at a \[qualified
    low-income\] consumer's principal place of residence"); 47 C.F.R. §
    54.411(c) (limiting Link Up support to qualified low-income
    consumers "for a second or subsequent time only for a principal
    place of residence with an address different from the one which Link
    Up support was provided previously").

[^16]: 47 C.F.R. § 54.407(c). The Commission has selected USAC as the
    Administrator of the universal service fund, including the
    disbursement of low-income support.

[^17]: *Id.*

[^18]: *See* Form 497 and Instructions.

[^19]: 47 C.F.R. § 54.413(b).

[^20]: *See* Form 497 and Instructions.

[^21]: First LOI Response to Inquiry 3; Letter from Stacey A. Klinzman,
    Regulatory Attorney, VCI Company, to Secretary, Federal
    Communications Commission dated January 16, 2007 ("VCI is a
    competitive local exchange provider that service\[s\] primarily
    low-income, residential customers with federal and state subsidized
    Lifeline and Link Up services.").

[^22]: First LOI Response at Exhibits A and B.

[^23]: *Id*.

[^24]: *Id.*

[^25]: Section 54.201(d)(1) states that an ETC must offer services using
    its own facilities or a combination of its own facilities and resale
    of another company's service. 47 C.F.R. § 54.201(d)(1).

[^26]: *See 2004 Lifeline Order*, 19 FCC Rcd at 8306-7, ¶¶ 5-6.

[^27]: *See id*., 19 FCC Rcd at 8355, Appendix G (providing that
    Minnesota has adopted federal eligibility criteria).

[^28]: *See* Letter from Karen Majcher, Vice President, High Cost & Low
    Income Division, USAC to Stan Johnson, VCI Company, dated May 30,
    2007 ("USAC Recovery Letter").

[^29]: *See* First LOI Response at Exhibit I, E-Mail from Michael
    Desrocher, Staff Auditor, USAC to Stanley Johnson, VCI, August 25,
    2006, (attaching December 2005 duplicate Lifeline and Link Up line
    data); *see also* E-mail from Stanley Johnson, VCI, to Michael
    Desrocher, Audit Staff, USAC, August 14, 2006, 4:26 PM (admitted
    that "two of the phone numbers on \[the audit\] sample list were for
    the same \[Lifeline\] consumers").

[^30]: *See* USAC Recovery Letter. USAC has subsequently recovered from
    VCI's recent reimbursement the overpayment applied to VCI's December
    2005 ineligible lines. *See Id.*

[^31]: *See* E-mail from Julie Thompson, OTAP to Stanley Johnson, VCI,
    dated August 30, 2006 ("August 30, 2006 OTAP Billing Email").

[^32]: *Id*.

[^33]: Public Utility Commission of Oregon Staff Report from Vicki
    McLean, Central Services Administrator, to the Public Utilities
    Commission, Residential Service Protection Fund: Request to Open a
    Formal Investigation of Vilaire Company Incorporated dba VCI, dated
    November 27, 2006 ("OTAP Staff Report"). VCI did not appeal the
    duplicate telephone numbers findings in the company's response to
    the OTAP staff report. *See* Letter from VCI to the OPUC dated
    December 1, 2006 in response to the OTAP Staff Report.

[^34]: *See Vilaire Company Incorporated, dba VCI, Investigation Into
    Oregon Telephone Assistance Program Billings, As Well As Revenue And
    Remittance Reporting*, Order (OTAP Dec. 8, 2006). ETCs such as VCI
    are eligible to participate in both the federal and state programs.

[^35]: First LOI Response at Exhibit J. The number of duplicate
    telephone numbers found by OTAP in Oregon matched the total number
    of duplicate numbers that VCI reported in its LOI response each
    month from September 2005 through March 2006. Based on these facts,
    we conclude there is a preponderance of the evidence that VCI
    submitted the same duplicate requests to USAC.

[^36]: Letter from Trent B. Harkrader, Deputy Chief, Investigations and
    Hearings Division, Enforcement Bureau, Federal Communications
    Commission, to Stanley Johnson, VCI Company, dated May 25, 2007
    ("May 25^th^ LOI"); Letter from Trent B. Harkrader, Deputy Chief,
    Investigations and Hearings Division, Enforcement Bureau, Federal
    Communications Commission, to Stanley Johnson, VCI Company, dated
    July 3, 2007 ("July 3^rd^ LOI").

[^37]: Letter from B. Lynn F. Ratnavale, Lukas, Nace, Gutierrez & Sachs,
    Chartered, Counsel for VCI Company, to Diana Lee, Attorney Advisor,
    Investigations and Hearings Division, Enforcement Bureau, Federal
    Communications Commission, dated June 13, 2007 (Response to
    Inquiries 1-5 and 6-10) ("First LOI Response").

[^38]: Letter from B. Lynn F. Ratnavale, Lukas, Nace, Gutierrez & Sachs,
    Chartered, Counsel for VCI Company, to Diana Lee, Attorney Advisor,
    Investigations and Hearings Division, Enforcement Bureau, Federal
    Communications Commission, dated June 27, 2007 (Response to Inquiry
    6) ("Second LOI Response").

[^39]: Letter from B. Lynn F. Ratnavale, Lukas, Nace, Gutierrez & Sachs,
    Chartered, Counsel for VCI Company, to Diana Lee, Attorney Advisor,
    Investigations and Hearings Division, Enforcement Bureau, Federal
    Communications Commission, dated July 12, 2007 ("Third LOI
    Response").

[^40]: 47 U.S.C. § 503(b)(1)(B); 47 C.F.R. § 1.80(a)(1); s*ee also* 47
    U.S.C. § 503(b)(1)(D) (forfeitures for violation of 14 U.S.C. §
    1464).

[^41]: 47 U.S.C. § 312(f)(1).

[^42]: H.R. Rep. No. 97-765, 97^th^ Cong. 2d Sess. 51 (1982).

[^43]: *See, e.g., Application for Review of Southern California
    Broadcasting Co.*, Memorandum Opinion and Order, 6 FCC Rcd 4387,
    4388 (1991) ("*Southern California Broadcasting Co.*").

[^44]: *See, e.g.,* *Callais Cablevision, Inc., Grand Isle, Louisiana*,
    Notice of Apparent Liability for Monetary Forfeiture, 16 FCC Rcd
    1359, 1362, ¶ 10 (2001) ("*Callais Cablevision*") (issuing a Notice
    of Apparent Liability for, *inter alia*, a cable television
    operator's repeated signal leakage).

[^45]: *Southern California Broadcasting Co.,* 6 FCC Rcd at 4388, ¶ 5;
    *Callais Cablevision, Inc.,* 16 FCC Rcd at 1362, ¶ 9.

[^46]: 47 U.S.C. § 503(b); 47 C.F.R. § 1.80(f).

[^47]: *See, e.g., SBC Communications, Inc*., Forfeiture Order, 17 FCC
    Rcd 7589, 7591, ¶ 4 (2002) (forfeiture paid).

[^48]: *See* First LOI Response, Exhibit J; First LOI Response, Response
    to Inquiry 15(d); Third LOI Response, Response to Inquiries 44-45.

[^49]: First LOI Response, Exhibit J; Third LOI Response at Exhibit R.
    USAC transmits monthly low-income payment to VCI one month after VCI
    submits the Form 497. USAC thus disbursed monthly low-income
    reimbursements to VCI for service provided from September 2005
    through February 2007 in each of the respective months from November
    2005 through April 2007. *See id*.

[^50]: VCI admitted that it initially designed a computer system that
    extracted data using only the customer's social security number. VCI
    updated the system to "utilize two additional customer identifiers,
    telephone number and address," in May 2007 "to ensure that customer
    data is collected and submitted correctly." First LOI Response,
    Response to Inquiry 15(d); *see also* Third LOI Response, Response
    to Inquiry 44.

[^51]: VCI used this system to support its reimbursement requests in all
    states it provided service. Thus, in addition to submitting claims
    for reimbursement for duplicate telephone numbers and addresses in
    Minnesota, Oregon, and Washington, VCI also presumably did the same
    in other states for which it sought reimbursement for support. We
    will review VCI's actions in these other states in a separate
    investigation.

[^52]: First LOI Response, Response to Inquiry 15(d).

[^53]: *See* First LOI Response at Exhibit I.

[^54]: Third LOI Response, Response to Inquiry 44.

[^55]: *See supra* at n.Error: Reference source not found.

[^56]: First LOI Response at Exhibit J.

[^57]: VCI ceased providing service in Washington in January 11, 2007
    and in Oregon on February 1, 2007.

[^58]: 47 U.S.C. § 503(b)(2)(B); *see also* 47 C.F.R. § 1.80(b)(2); *see
    also Amendment of Section 1.80(b) of the Commission's Rules,
    Adjustment of Forfeiture Maxima to Reflect Inflation,* Order, 15 FCC
    Rcd 18221 (2000).

[^59]: *See, e.g., Local Phone Services, Inc.,* Notice of Apparent
    Liability for Forfeiture, 21 FCC Rcd 9974, 9979, ¶ 14 (2006)
    ("*Local Phone Services NAL*").

[^60]: Carriers must also file once per year a Form 499-A reporting the
    previous year's annual revenues.

[^61]: *See supra* at n.Error: Reference source not found.

[^62]: *See, e.g.,* *Globcom, Inc.*, Notice of Apparent Liability for
    Forfeiture and Order, 18 FCC Rcd 19893, 19905, ¶ 34 (2003)
    (admonishing for failure to file Form 499 more than one year prior
    to the NAL date).

[^63]: As mentioned above, USAC requires an ETC seeking low-income
    reimbursement to file a Form 497 for each state and month. VCI filed
    eight inaccurate Form 497s from August 2006 through November 2006
    for Oregon and Washington, and eight inaccurate Form 497s from
    August 2006 through March 2007 for service in Minnesota.

[^64]: 47 U.S.C. § 254(b)(3).

[^65]: *See, e.g., Local Phone Services NAL.,* 21 FCC Rcd at 9980, ¶ 15.

[^66]: "Nonpayment of universal service contributions is an egregious
    offense that bestows on delinquent carriers an unfair competitive
    advantage by shifting to compliant carriers the economic costs and
    burdens associated with universal service." *Local Phone Services
    NAL,* 21 FCC Rcd at 9979, ¶ 15.

[^67]: First LOI Response at Exhibit J; Third LOI Response at Exhibit R.

[^68]: 47 C.F.R. § 54.407(b).

[^69]: In this respect, the unlawful receipt of USF monies resembles the
    failure to pay USF contributions. *See Globcom, Inc.,* Order of
    Forfeiture, 21 FCC Rcd 4710*,* 4723, ¶ 35 n.105 (2006) *(\"Globcom
    Forfeiture Order*\") ("Each failure to pay the amount due each month
    constituted a violation that continued for more than 10 days);
    *Matrix Telecom, Inc*., Notice of Apparent Liability, 15 FCC Rcd
    13544 (2000); *Conquest Operator Services Corp.*, Order of
    Forfeiture, 14 FCC Rcd 12518, 12525, ¶ 16 (1999). Moreover, USAC
    permits carriers seeking low-income support up to 27 months to
    revise any Form 497s.

[^70]: *See, e.g., Local Phone Services NAL,* 21 FCC Rcd at 9980, ¶ 16.

[^71]: *InPhonic, Inc.,* Order of Forfeiture and Further Notice of
    Apparent Liability for Forfeiture, FCC 07-58 at ¶ 28 & n.87 (rel.
    May 3, 2007) (citing cases).

[^72]: *See, e.g., Local Phone Services NAL,* 21 FCC Rcd at 9980, ¶ 15.

[^73]: First LOI Response at Exhibit J; Third LOI Response at Exhibit R.

[^74]: 47 C.F.R. § 54.413(b).

[^75]: *See 1997 Universal Service Order*, 12 FCC Rcd at 8957, ¶ 341;
    *2004 Lifeline Order*, 19 FCC Rcd at 8306, ¶ 4; *See also* C.F.R. §§
    54.411(a)(1), (c).

[^76]: *See supra* n.Error: Reference source not found.

[^77]: *See*, *e.g.*, *Federal-State Joint Board on Universal Service*,
    Order, 20 FCC Rcd 6371, 6402, ¶ 72 (2005).

[^78]: *See* 47 C.F.R. § 1.1914.

[^79]: 47 U.S.C. § 4(i).

[^80]: 47 C.F.R. §§ 54.407(c) and 54.413(b).

[^81]: *See* 47 C.F.R. § 1.1914.