Justices Reject Narrow Reading of Government Fraud Claims (1)

The US Supreme Court ruled against Wisconsin Bell in its bid to avoid a whistleblower suit that accuses it of submitting false claims for reimbursement to a government program that subsidizes the internet for schools and libraries.

In a unanimous decision Friday, the court rejected the telecommunications provider’s claim that its reimbursement requests can never qualify as claims under the False Claims Act because the program money comes from private carriers and is handled by a private corporation.

Writing for the court, Justice Elena Kagan said the Federal Communications Commission’s E-rate program reimbursements at issue are “claims” under the FCA because the government provided, at a minimum, a portion of the money that was applied for.

“In the years in which those requests were made, the Government transferred more than $100 million from the Treasury into the pool of funds used to pay E-Rate subsidies,” she wrote. “That is enough to create a ‘claim’ under the Act, and to allow a suit alleging fraud to go forward.”

Whistleblower Todd Heath alleged that Wisconsin Bell overcharged schools and libraries for services under E-Rate, resulting in a false reimbursement claim against the $9 billion Universal Services Fund. The fund was set up to help expand telecommunications services to rural and low-income communities.

Wisconsin Bell had argued that the entity set up to administer the fund—the Universal Service Administrative Company—is a private, not-for-profit corporation and not a government agency. The $100 million was funded entirely by private carriers’ contributions, the company said.

But Kagan said Wisconsin Bell mischaracterizes government’s role in bringing the $100 million to the fund.

“The Government was not a passive throughway for the transmission of E-rate moneys from one private party (the carrier) to another (the Administrative Company),” she said. “Nor were the Government’s activities confined to ‘facilitating’ such transfers, as Wisconsin Bell would have it.”

In a concurring opinion that Justice Brett Kavanaugh joined in full and Justice Samuel Alito joined in part, Justice Clarence Thomas said he doesn’t understand the court’s opinion to be resolving whether the government would have “provided” money in the relevant sense if it had acted as a “passive throughway” or a mere “transmittor” or “facilitator.”

Kavanaugh also wrote separately to seemingly invite a future constitutional challenge to the FCA’s qui tam provisions, which allow private parties to sue people for defrauding the federal government. He said the provisions raise “substantial constitutional questions” under Article II, which gives the government its power to enforce federal laws.

“Those constitutional questions are not before the Court in this case,” Kavanaugh said in the short opinion Thomas joined. “But in an appropriate case, the Court should consider the competing arguments on the Article II issue.”

Kavanaugh and Thomas made similar comments in a 2023 decision that backed the government’s dismissal of a whistleblower’s fraud suit.

The case is Wisconsin Bell, Inc. v. United States, ex rel. Todd Heath, U.S., No. 23-1127.