A Federal Communications Commission member sharply criticized his own agency this week, saying that for years “it turned a blind eye” to Honolulu telecommunications executive Albert Hee’s apparent use of ratepayer money to fund a lavish lifestyle of personal massages and family trips to Tahiti, France, Switzerland and Disney World, as well as college tuition for his kids and “salaries” to family members.
Commissioner Ajit Pai called the failure of the FCC to crack down on Sandwich Isles Communications “a disgrace” in a public statement issued Monday. Pai was appointed by President Barack Obama to the five-member commission in 2012.
Hee was convicted in July on multiple counts of tax fraud after federal prosecutors accused him of skimming millions of dollars from Sandwich Isles’ parent company, Waimana Enterprises, to pay for personal expenses.
Hee, who is seeking a new trial, is scheduled to be sentenced at the end of November.
Hee received more than $242 million from the FCC’s Universal Service Fund since 2003 to subsidize his company’s phone and Internet services on Hawaiian homelands. Sandwich Isles serves about 3,600 customers. The company has also been receiving several million dollars a year in reimbursements for underground cable costs, according to federal documents.
“For five years, the agency has been sitting on an application for review that would deny Sandwich Isles the millions of dollars it has been receiving to pay off the Paniolo Cable and line the pockets of Hee’s children,” wrote Pai. “And for five years, we’ve known of Hee’s penchant for self-dealing and skill at pocketing taxpayer dollars.”
Pai said he directed his staff to push to eliminate the cable funding, but a proposed review of the funding never came before the commission. “For some reason, the item was pulled from circulation and has never resurfaced,” he wrote.
Pai called on his colleagues to support a full investigation of Sandwich Isles and its “untoward finances” as well as the recovery of “whatever funds we can for the American taxpayer.”
“It is time for the taxpayer-funded party to end,” he wrote.
The statement came in response to a public notice issued this week by the FCC reminding telecommunications companies receiving money from the Universal Service Fund that the money must be used for its intended purpose: to help rural and high-cost areas receive telecommunications services. The fund is supported by fees tacked onto phone bills.
The FCC included a long list of items that can’t be covered by the funds, including entertainment, alcohol, food for weddings and births, political contributions, personal rent and mortgage payments, and more.
The FCC didn’t call out any companies by name in its public notice. However, Pai wrote that “one can only assume that this public notice, as well as the recent suspension of USF payments to Sandwich Isles, was a reaction to (Hee’s) conviction.”
The FCC suspended Sandwich Isles’ monthly Universal Service Fund payments of about $1.4 million in June and is conducting an extensive audit of the company’s expenses and operations that is expected to conclude in December.
Commissioners Mignon Clyburn and Michael O’Rielly also issued a statement in reference to the public notice saying that “the vast number of providers are good actors and would never take advantage of the system, but there are unfortunate examples to the contrary and spending on outrageous items has occurred.”
“We remain concerned that certain expenses not related to the provision of service, such as for artwork and cafeterias, may oddly be permitted under certain readings of our rules,” the commissioners continued, while urging the commission to address those issues in the coming months.
FCC Chairman Tom Wheeler did not respond directly to Pai’s criticisms. But in a statement, FCC spokesman Mark Wigfield said that one of Wheeler’s “top priorities is advancing an efficient, effective universal service fund so that consumers across the nation, including in remote and rural areas, have access to modern, affordable communications.”
The public notice “is an important reminder to all carriers that these funds must benefit customers, not companies,” wrote Wigfield.
In response to the FCC statements, U.S. Sen. Brian Schatz released a statement saying that he has been working with federal and state regulators to ensure that Sandwich Isles’ customers have uninterrupted service in case the company is unable to continue its operations on Hawaiian homelands.
“There are several ongoing legal proceedings, audits and other processes involving Sandwich Isles Communications, and these must be continued without interference from elected or appointed officials,” Schatz said in a statement. “The public record now shows, however, that this scrutiny is well warranted.”
