Sandwich Isles Communications faces $76M penalty

Embattled Hawaii telecommunications company Sandwich Isles Communications now faces more than $49 million in fines that are being proposed by the Federal Communications Commission for allegedly misusing federal funds, according to the agency.

Sandwich Isles is also being required to repay another $27.3 million in federal funds for allegedly violating the rules of the FCC’s “high-cost” program between 2002 and 2015, according to an announcement by the FCC. The program is designed to support telecommunications companies that operate in rural or other high-cost areas.

After a vote on Monday, the FCC announced the proposed fine, which is formally known as a Notice of Apparent Liability for Forfeiture. Sandwich Isles will have a chance to respond to the ruling before any final action is taken on the fine, according to the FCC.

Al Hee, the founder of the company, was sent to prison earlier this year after he was convicted of federal tax evasion.

Sandwich Isles holds the exclusive license to provide telecommunications services on Hawaiian homelands, but the FCC last year suspended millions of dollars in federal subsidies to the company while it audited the firm’s spending.

The state Department of Hawaiian Home Lands announced last year that Hee’s conviction had prompted a “review and assessment” by the department to determine whether Hee’s legal problems could affect services for homesteaders, but the department has never made public the results of that review.

U.S. Sen. Brian Schatz, D-Hawaii, issued a statement Monday saying that he supports the FCC’s effort to “combat waste, fraud and abuse of the Universal Service Fund by Sandwich Isles Communications,” adding, “The mishandling of these funds is morally and legally unacceptable, and I expect SIC to fully comply with the order without disruptions in service or additional costs to their customers on Hawaiian homelands.”

The proposed fine and the demand for repayment revolve around the use of Universal Service Funds, which are generated by money collected from telecommunications customers across the country. Sandwich Isles has received hundreds of millions of dollars in Universal Service Funds since it began operations.

The proposed fines follow an investigation by the FCC’s Enforcement Bureau’s Universal Service Fund Strike Force. The commission announced the proposed fine of $49,598,448 on Sandwich Isles, its parent company Waimana Enterprises, and Hee.

Sandwich Isles is accused of violating the commission’s accounting rules and submitting inaccurate data that was used to obtain millions of dollars in improper high-cost support payments, according to a statement Monday from the commission. This is the FCC’s first enforcement action in the high-cost program, according to the commission.