Armstrong to Pay $6.5 Million for Overcharging FCC Subsidy Fund

WASHINGTON, July 14, 2024 –  Stemming from a whistleblower lawsuit, the Justice Department said Friday that Armstrong Group in Butler, Pa., has agreed to pay $6.5 million to resolve allegations it inflated costs to receive higher than allowed payments from the Federal Communications Commission’s Universal Service Fund. 

“When providers like the Armstrong Group fail to follow federal law and FCC regulations, they jeopardize not only critical government programs but also consumers’ ability to access a modern lifeline: Rapid, reliable, and efficient telecommunications services,” U.S. Attorney Eric Olshan for the Western District of Pennsylvania said in a press release.

Armstrong has denied wrongdoing in a dispute that apparently began when a former company executive filed a whistleblower complaint. DOJ said the settlement involved allegations that Armstrong violated the False Claims Act by submitting improper bills to the USF.

Armstrong is a closely held company founded in 1946 and has about 2,000 employees. President and CEO Dru Sedwick is the third generation in his family to head the company. Armstrong Utilities is the company's cable TV and broadband division.

DOJ’s press release said that from 2008 to 2023, five Armstrong-owned incumbent local exchange carriers received an inflated level of support from the USF’s $4.3 billion High Cost Fund. 

Armstrong, DOJ said, failed to “comply with FCC regulations that governed what costs they were allowed to report for purposes of claiming subsidy payments from the government, and as a result these companies received greater subsidy payments than those to which they were entitled.”

As part of the settlement, DOJ said Armstrong’s former Controller, James Ranko, will receive almost $1.3 million for filing a whistleblower lawsuit against the company. 

According to a report in the Pittsburgh Post-Gazette, Armstrong issued a statement Friday saying: “After 7 years of investigation, with which we cooperated fully, there has been no finding of any wrongdoing on the part of Armstrong with respect to FCC subsidy programs. Armstrong believes that it acted properly at all times.”