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Wednesday, September 30, 2020
FCC Fines Al Hee $49M for Fraud
By News Release @ 8:11 PM :: 1333 Views :: DHHL, Ethics

FCC FINES SANDWICH ISLES $49,598,488 FOR DEFRAUDING UNIVERSAL SERVICE FUND

Company Received Over $27 Million in Unearned Payments Due to Falsified Cost Reporting

News Release from FCC

WASHINGTON, September 30, 2020—The Federal Communications Commission today fined Sandwich Isles Communications, Waimana Enterprises, and Albert S.N. Hee $49,598,488 for violations of Universal Service Fund program rules that resulted in millions of dollars in improper payments. The fine reinforces the Commission’s commitment to combat waste, fraud, and abuse in the Universal Service Fund. Sandwich Isles was the designated carrier receiving support to deploy and maintain communications networks serving Americans living on the Hawaiian Homelands through the Fund’s High-Cost program, which is designed to ensure that consumers in rural and other high-cost areas have access to modern communications networks.

Hee used his control of Sandwich Isles, Waimana, and other affiliated companies to tap corporate funds to pay for more than $4 million in personal expenses benefitting himself and his family, including personal massages, personal travel and meals, tuition payments for Hee’s children, a vehicle and home for Hee’s children, and salaries and benefits paid to Hee’s wife and children while they did not actually perform any work for Waimana. Sandwich Isles also used Universal Service support to pay Waimana inflated rent and management fees as well as unjustified bonuses to Hee.

In 2015, Hee was convicted of criminal tax fraud and sentenced to nearly five years in federal prison. On December 5, 2016, the Commission eliminated Sandwich Isles’ ability to receive additional support from the Fund, took action to recover $27 million in improper payments Sandwich Isles had received, and proposed a $49,598,448 fine against Sandwich Isles, Waimana Enterprises, and Hee for its apparent violations of High-Cost program rules. The Commission found Sandwich Isles apparently liable for the following violations: (1) filing inaccurate data in its annual cost studies; (2) falsely certifying the accuracy of the data contained within the cost studies; (3) misclassifying costs relating to its cable and wire facilities; (4) overstating the costs related to the lease of abandoned water mains; and (5) failing to keep its accounts, records, and memoranda as prescribed by the Commission’s rules.

The forfeiture order released today finds that Sandwich Isles, Waimana, and Hee are jointly and severally liable for the full proposed penalty of $49,598,448. After a thorough review of all aspects of this matter, the Commission has found no reason to cancel, withdraw, or reduce the proposed penalty of $49,598,488 against Sandwich Isles. The Commission’s federal High-Cost universal support program allows eligible carriers that serve high-cost areas to recover some of their costs from the Fund to help defray the costs of building and maintaining telecommunications plant to service rural and high-cost areas. Given the core importance of this program to serving America’s broadband needs, the Commission has an ongoing obligation to ensure that universal service funds are used properly, and to protect the Universal Service Fund from waste, fraud, and abuse.

Action by the Commission September 30, 2020 by Forfeiture Order (FCC 20-131). Chairman Pai, Commissioners O’Rielly, Carr, Rosenworcel, and Starks approving. Chairman Pai issuing a separate statement.

  *   *   *   *   *

Statement of chairman Ajit Pai

Re: In the Matter of Sandwich Isles Communications, Inc., Waimana Enterprises, Inc., Albert S.N. Hee, EB-IHD-15-00019603

Over the course of nearly 15 years, Sandwich Isles Communications received millions of dollars through the Commission’s Universal Service Fund. This was taxpayer money intended to support deployment and maintenance of communications networks for the benefit of the people living in the Hawaiian Homelands. But Albert Hee—then the sole shareholder of Sandwich Isles and its parent company, Waimana Enterprises—had different ideas.

Hee was engaged in a long-running scheme to use corporate funds from Sandwich Isles, Waimana, and several other affiliated companies he controlled to pay numerous personal expenses for himself and members of his family, including more than $90,000 to his personal masseuse, family vacations to Europe and the South Pacific, his children’s college tuition, vehicles, and inflated salaries for his wife and children. In 2016, Hee was sentenced to nearly five years in federal prison in connection with this scheme. And following an investigation by USAC that uncovered Hee’s and Sandwich Isles’ misappropriation of Universal Service Fund money, the Commission barred Sandwich Isles from siphoning any more money from the Fund and sought to recover the $27 million Sandwich Isles overcharged the Fund. We also proposed to impose a forfeiture of $49.6 million on the company.

As the Commission determined in 2016, and reaffirmed last year, Sandwich Isles has no claim to a single dime of the $27 million it improperly obtained from the Fund. And this was no accounting error or honest misunderstanding of the Commission’s rules. It was a willful effort to defraud the Universal Service Fund—essentially, all taxpayers—for private gain. That’s why I am so pleased that the Commission today has imposed a forfeiture against Sandwich Isles, Waimana, and Albert Hee of $49.6 million, the maximum allowed by law for their violations of the Commission’s rules. This is one of the largest forfeitures the Commission has ever imposed, period—let alone on a participant in the Commission’s high-cost universal service program. It’s well-deserved in this case, given the repeated, willful violations involved, and it serves to reaffirm the Commission’s commitment to stamping out waste, fraud, and abuse in the Universal Service Fund.

The American people, and particularly, those living in the Hawaiian Homelands, deserve better. And thankfully, there is good news ahead. Next month, bidding will kick off in the $16 billion Rural Digital Opportunity Fund Phase I auction, and unserved parts of Sandwich Isles’ former service area will be eligible for bidding by service providers who will use taxpayer dollars to bring broadband to unserved Americans living there—not for massages, vacations, and cars.

It is impossible to say how many current and former staff throughout the agency have contributed in one way or another to the many facets of this decade-long saga, but it’s a lot and I am grateful to each one, including those that worked hard on the item we adopt today: Pam Gallant, Rosemary Harold, Meghan Ingrisano, Shannon Lipp, Mercedeh Momeni, Keith Morgan, Rakesh Patel, Raphael Sznajder, David Sobotkin, Adam Suppes, and Romanda Williams of the Enforcement Bureau; Richard Mallen, Linda Oliver, Bill Richardson, and Derek Yeo of the Office of General Counsel; and Alex Minard, Dangkhoa Nguyen, Ryan Palmer, Gilbert Smith of the Wireline Competition Bureau. 

KHON: Sandwich Isles Communications founder fined $49 million by FCC

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