Data Research Corp. sues Universal Service Administrative Co. for $105M
The complaint follows alleged failures to fund services for Puerto Rico schools under the E-Rate program in fiscal 2001.
Data Research Corp., which provided technology services to the Puerto Rico Department of Education (PRDOE), has filed a civil suit against Universal Service Administrative Co. (USAC) for allegedly withholding payments totaling $105.6 million, plus accrued interest.
The lawsuit, filed in the U.S. District Court for the District of Puerto Rico, underscores ongoing disputes over discounted internet and broadband services to schools under the federal E-Rate program.
The dispute traces back to services DRC provided in fiscal year 2001 under the E-Rate program, which is designed to ensure that schools and libraries can access affordable telecommunications and information services.
According to DRC, USAC failed to reimburse it for services rendered to the PRDOE, affecting between 709 and 736 schools, known as Phase II Schools.
DRC alleges a breach involving three sums: $9.9 million for services directly provided, $25.6 million in financial damages due to a contract cancellation on Feb. 15, 2002, and $70 million for the devaluation of DRC’s business following the cancellation.
Judge Pedro A. Delgado-Hernández has been assigned to the case. The lawsuit asserts that USAC’s actions, or inactions, led directly to significant losses for DRC, including the collapse of a potential acquisition deal where TAG Venture Partners intended to purchase DRC for up to $79 million.
DRC argues that USAC’s failure to commit and disburse the funds constituted a dereliction of its administrative duties under the Communications Act of 1934, as amended by the Telecommunications Act of 1996.
DRC attorneys Felix Román of Roman & Associates PSC and Camilo K. Salas III of Salas & Co. LC emphasized USAC’s alleged mismanagement and failure to “administer the universal service support mechanisms in an efficient, effective, and competitively neutral manner,” according to the complaint.
“USAC violated that duty by failing to timely make a final decision on PRDOE’s funding request during 22 years; by refusing to accept and respect the findings of the FYs 2001 and 2002 KPMG Audit Report (which the Commission mandated in the Puerto Rico Order and the USAC Board of Directors approved in 2005); and by instead continuing to demand for 13 years that PRDOE once again prove, 22 years after the fact and with documents that never existed, that it complied with the FYs 2001 and 2002 funding (or necessary resources) requirements,” they attorneys argued.
Implications for the E-Rate program
The lawsuit highlights broader issues within the E-Rate program, particularly around the administration and disbursement of funds intended for educational infrastructure. It raises questions about the efficiency and fairness of the program’s management and how funding decisions affect service providers and educational institutions dependent on this support.
While USAC is designated to manage these federal funds, it does not make policy but is responsible for the collection and distribution of universal service funds under the FCC’s direction. Its handling of the situation could lead to reevaluations of procedural and oversight mechanisms within the program.
As the legal process continues, the outcome of the lawsuit could have implications for federal funding processes and the administration of the E-Rate program. It also highlights the challenges faced by service providers and educational institutions in navigating the complexities of federal funding and regulatory compliance.
