E-Rate False Claims Case Headed to Trial

WASHINGTON, Nov. 4, 2025 – A decade-old whistleblower case over allegedly fraudulent telecom subsidy claims is finally headed to trial. 

AT&T, which maintains its claims under the Federal Communications Commission’s E-Rate program were lawful, had tried to have the case dismissed this summer. U.S. District Judge Lynn Adelman, of the Eastern District of Wisconsin, denied that request in an Oct. 29 order.

That will send the case to trial, which a spokesperson for whistleblower’s law firm said was scheduled for Jan. 20.

The case, first filed in 2008, stems from telecom auditor Todd Heath’s claims that AT&T overcharged schools participating in E-Rate, which provides discounts on internet bills. He sued under the False Claims Act, which mandates triple damages for fraudulently obtaining government cash.

After a lengthy legal battle, the Supreme Court ruled in February that funding for E-Rate, part of the $8 billion-per-year Universal Service Fund, was provided in part by the government and allowed the case to proceed. 

The unanimous decision was narrow though, and justices didn’t rule on whether all USF money was government money for the purposes of the FCA. The program is funded by fees on telecom companies, but a relatively small amount of debts and penalties collected by the Justice Department pass through the Treasury on their way to the fund, and justices said that, at least, was government cash.

Lawyers for both AT&T and Heath told the high court that if they ruled in that way, as they appeared inclined to do at oral arguments, it would quickly tee up more litigation over the potential damages. That’s already begun, even before a trial on the merits of Heath’s claims of fraud.

AT&T argued to Adelman that it shouldn’t have to pay any damages regardless of the outcome, saying that even if the government provided some USF money, the government didn’t actually lose money to fraudulent USF claims because the program was funded by fees on telecom providers.

That was splitting hairs to Adelman, who in the past has said that all USF money is the government’s by virtue of the government operating the program to meet Congressional goals.

“Because all of the subsidies were provided by the government, all losses to the Fund are losses to the government,” he wrote in the order.

The company had also asked Adelman to find that, if damages were allowed, they had to be capped, at most, at the $100 million from the Treasury that was contributed to the fund from 2002-2015.

The judge again declined to do so. 

“But, at the risk of sounding like a broken record, I repeat that all of the money was provided by the government, and it is as though the government had contributed the entirety of the Fund. Thus, any loss to the Fund is equivalent to a loss to the government. The entire

balance of damages (i.e., losses) may be recovered.”

In a concurring opinion, conservative Justices Clarence Thomas and Brett M. Kavanaugh said they doubted the FCA applied to all of the USF money. They also questioned whether private pirates like Heath should be allowed to sue under the FCA.

AT&T also asked to have the case dismissed on those grounds, arguing the provision of the law allowing that was unconstitutional, but Adelman refused.