The U.S. Supreme Court handed down a unanimous ruling on Friday, reinforcing the federal government’s power to pursue fraud claims against telecom companies accused of overcharging schools and libraries under the FCC’s E-Rate program. The decision, a major victory for whistleblowers, upholds the Seventh Circuit’s ruling that funds from the E-Rate program are subject to the False Claims Act (FCA), as they originate from the U.S. Treasury.

Wisconsin Bell’s Defense Falls Flat

At the heart of the dispute was Wisconsin Bell, an AT&T subsidiary, which had sought to escape liability by arguing that E-Rate funds are privately collected fees, rather than government funds. The company contended that since the FCC-mandated fees are collected and distributed by the Universal Service Administrative Co. (USAC)—a private entity—False Claims Act lawsuits should not apply.

But the justices firmly disagreed.

She further explained that funds collected through taxes, fines, or fees are routinely funneled into Treasury accounts before being distributed, reinforcing their governmental nature.

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