[Federal Register Volume 76, Number 215 (Monday, November 7, 2011)]
[Notices]
[Pages 68760-68762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-28683]


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FEDERAL COMMUNICATIONS COMMISSION

[DA 11-1733]


Notice of Suspension and Commencement of Proposed Debarment 
Proceedings; Schools and Libraries Universal Service Support Mechanism

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: The Enforcement Bureau (the ``Bureau'') gives notice of Mr. 
Jeremy R. Sheets's suspension from the schools and libraries universal 
service support mechanism (or ``E-Rate Program''). Additionally, the 
Bureau gives notice that debarment proceedings are commencing against 
him. Mr. Sheets, or any person who has an existing contract with or 
intends to contract with him to provide or receive services in matters 
arising out of activities associated with or related to the schools and 
libraries support mechanism, may respond by filing an opposition, 
supported by documentation to Joy Ragsdale, Federal Communications 
Commission, Enforcement Bureau, Investigations and Hearings Division, 
Room 4-A236, 445 12th Street SW., Washington, DC 20554.

DATES: Oppositions and any relevant documentation must be received by 
December 7, 2011. Any opposition, however, must be received 30 days 
from the receipt of the suspension letter or November 17, 2011, 
whichever comes first. The Bureau will decide any opposition for 
reversal or modification of suspension or debarment within 90 days of 
its receipt of any information.

ADDRESSES: Federal Communications Commission, Enforcement Bureau, 
Investigations and Hearings Division, Room 4-A236, 445 12th Street SW., 
Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Joy Ragsdale, Federal Communications 
Commission, Enforcement Bureau, Investigations and Hearings Division, 
Room 4-A236, 445 12th Street SW., Washington, DC 20554. Joy Ragsdale 
may be contacted by phone at (202) 418-1697 or email at 
[email protected]. If Ms. Ragsdale is unavailable, you may contact 
Ms. Terry Cavanaugh, Acting Chief, Investigations and Hearings 
Division, by telephone at (202) 418-1420 and by email at 
[email protected].

SUPPLEMENTARY INFORMATION: The Bureau has suspension and debarment 
authority pursuant to 47 CFR 54.8 and 47 CFR 0.111(a)(14). Suspension 
will help to ensure that the party to be suspended cannot continue to 
benefit from the schools and libraries mechanism pending resolution of 
the debarment process. Attached is the suspension letter, DA 11-1733, 
which was mailed to Mr. Sheets and released on October 18, 2011. The 
complete text of the notice of suspension and initiation of debarment 
proceedings is available for public inspection and copying during 
regular business hours at the FCC Reference Information Center, Portal 
II, 445 12th Street SW., Room CY-A257, Washington, DC 20554. In 
addition, the complete text is available on the FCC's Web site at 
http://www.fcc.gov. The text may also be purchased from the 
Commission's duplicating inspection and copying during regular business 
hours at the contractor, Best Copy and Printing, Inc., Portal II, 445 
12th Street SW., Room CY-B420, Washington, DC 20554, telephone (202) 
488-5300 or (800) 378-3160, facsimile (202) 488-5563, or via email 
http://www.bcpiweb.com.

Federal Communications Commission.
Theresa Z. Cavanaugh,
Acting Chief, Investigations and Hearings Division, Enforcement Bureau.

    The suspension letter follows:

October 18, 2011

DA 11-1733

SENT VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED AND EMAIL

Mr. Jeremy R. Sheets
c/o Mr. Martin E. Crandall
Clark Hill PLC
500 Woodward Ave., Suite 3500

[[Page 68761]]

Detroit, MI 48226-3435

Re: Notice of Suspension and Initiation of Debarment Proceedings, 
File No. EB-11-IH-1122

Dear Mr. Sheets:

    The Federal Communications Commission (``Commission'') has 
received notice of your conviction of wire fraud in violation of 18 
U.S.C. 1343 in connection with your participation in the federal 
schools and libraries universal service support mechanism (``E-Rate 
program'').\1\ Consequently, pursuant to 47 CFR 54.8, this letter 
constitutes official notice of your suspension from the E-Rate 
program. In addition, the Enforcement Bureau (``Bureau'') hereby 
notifies you that the Bureau will commence debarment proceedings 
against you.\2\
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    \1\ Any further reference in this letter to ``your conviction'' 
refers to your conviction in United States v. Jeremy R. Sheets, 
Criminal Docket No. 1:10-cr-380-1, Judgment (W.D. Mi. 2011) 
(``Judgment'').
    \2\ 47 CFR 54.8; 47 CFR 0.111 (delegating to the Enforcement 
Bureau authority to resolve universal service suspension and 
debarment proceedings). The Commission adopted debarment rules for 
the schools and libraries universal service support mechanism in 
2003. See Schools and Libraries Universal Service Support Mechanism, 
Second Report and Order and Further Notice of Proposed Rulemaking, 
18 FCC Rcd 9202 (2003) (``Second Report and Order'') (adopting Sec.  
54.521 to suspend and debar parties from the E-rate program). In 
2007 the Commission extended the debarment rules to apply to all 
Federal universal service support mechanisms. Comprehensive Review 
of the Universal Service Fund Management, Administration, and 
Oversight; Federal-State Joint Board on Universal Service; Schools 
and Libraries Universal Service Support Mechanism; Rural Health Care 
Support Mechanism; Lifeline and Link Up; Changes to the Board of 
Directors for the National Exchange Carrier Association, Inc., 
Report and Order, 22 FCC Rcd 16372 App. C at 16410-12 (2007) 
(Program Management Order) (Sec.  54.521 of the universal service 
debarment rules was renumbered as Sec.  54.8 and subsections (a)(1), 
(5), (c), (d), (e)(2)(i), (3), (e)(4), and (g) were amended.)
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I. Notice of Suspension

    The Commission established procedures to prevent persons who 
have ``defrauded the government or engaged in similar acts through 
activities associated with or related to the schools and libraries 
support mechanism'' from receiving the benefits associated with that 
program.\3\ The E-Rate program rules require school applicants to 
pay a percentage of the total cost of eligible goods and services 
requested for funding.\4\ To ensure a fair and competitive bidding 
process, the E-Rate program rules also prohibit a service provider 
from soliciting or offering gifts or donations to a school 
applicant, and likewise prohibit a school applicant from accepting 
gifts or donations from a service provider participating in the E-
Rate program, with the exception of certain de minimis gifts or 
charitable donations unrelated to E-Rate procurement activities.\5\
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    \3\ Second Report and Order, 18 FCC Rcd at 9225, Paragraph 66; 
Program Management Order, 22 FCC Rcd at 16387, Paragraph 32. The 
Commission's debarment rules define a ``person'' as ``[a]ny 
individual, group of individuals, corporation, partnership, 
association, unit of government or legal entity, however 
organized.'' 47 CFR 54.8(a)(6).
    \4\ 47 CFR 54.503 (2010).
    \5\ 47 CFR 54.503(d) (2010). See also, Schools and Libraries 
Universal Service Support Mechanism, A National Broadband Plan for 
Our Future, Sixth Report and Order, 25 FCC Rcd 18762 Paragraphs 88-
90 (2010), clarified by, Schools and Libraries Universal Service 
Support Mechanism, A National Broadband Plan for Our Future, Order, 
25 FCC Rcd 17324 (2010).
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    On January 24, 2011, you pled guilty to wire fraud in connection 
with a scheme you devised and participated in to defraud the federal 
E-Rate program.\6\ For a six-year period beginning in December 2001, 
as president and co-owner of CMS Internet LLC (``CMS'') \7\ you 
induced two prospective school district applicants in Western 
Michigan to hire CMS as their E-Rate vendor by (1) falsely 
representing to the applicants that they could participate in the 
program at no cost to them; \8\ (2) compensating the school 
districts for their E-Rate expenses with either purported 
``donations'' or ``leasing payments'' that were calculated to 
coincide with the amount of each school's non-discounted share of E-
Rate expenses; \9\ and (3) submitting materially false and 
fraudulent applications to order ineligible and undisclosed goods 
and services that were paid for out of overcharges to the E-Rate 
program.\10\ In further violation of the E-Rate rules, you gave 
gifts to a school district employee that included a wide screen 
television and entertainment system, which you paid for through 
overcharges to the E-Rate program.\11\
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    \6\ United States v. Jeremy R. Sheets, Case No. 1:10-cr-380, 
Criminal Minute Sheet (W.D. Mi. 2011). See Justice News, Dep't of 
Justice, Michigan Businessman Sentenced to 15 months in Prison for 
Defrauding the Federal E-Rate Program, July 18, 2011, at http://www.justice.gov/opa/pr/2011/July/11-at-935.html (``Press Release'').
    \7\ CMS Internet, LLC provides internet access and related 
technology services to various school districts that participate in 
the federal E-Rate program. See U.S. v. Sheets, Case No. 1:10-cr-
380, Felony Information at 1 (W.D. Mi. 2010) (``Felony 
Information'').
    \8\ United States v. Jeremy R. Sheets, Case No. 1:10-cr-380, 
Plea Agreement at 3 (W.D. Mi. 2010) (``Plea Agreement'').
    \9\ In July 2004, Mr. Sheets donated $20,458.25 to one school 
district, and purported to ``lease'' the other school district's 
radio towers with the intent to repay the school districts for their 
share of E-Rate expenses. Id.; Felony Information at 3.
    \10\ Plea Agreement at 4.
    \11\ Id. at 5.
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    Furthermore, in responding to an audit conducted in 2006 by the 
Universal Service Administration Company (``USAC''), you transmitted 
by electronic mail fraudulent invoices that falsely stated a school 
district applicant had paid its share of E-Rate program expenses 
during 2006-2007. In addition, you failed to disclose that E-Rate 
funding was used to purchase ineligible goods and services.\12\ 
Finally, you obstructed a 2007 federal grand jury investigation by 
instructing a CMS employee to testify falsely before the grand jury 
about receiving gifts, and to destroy E-Rate program records and 
remove the hard drives located on that employee's work and home 
computer in exchange for new computer hard drives.\13\ Your scheme 
caused the E-Rate program to suffer an estimated loss between 
$30,000 and $70,000.\14\ These actions constitute the conduct or 
transactions upon which this suspension notice and debarment 
proceeding are based.\15\
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    \12\ Id.
    \13\ Id. at 5-7.
    \14\ Id. at 4.
    \15\ Second Report and Order, 18 FCC Rcd at 9226, Paragraph 70; 
47 CFR 54.8(e)(2)(i).
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    On June 21, 2011, the United States District Court for the 
Western District of Michigan sentenced you to serve 15 months in 
prison followed by two years of supervised release for defrauding 
the federal E-Rate program.\16\ The court also prohibited you from 
``having any involvement with any government-backed or federally-
regulated programs during the course of supervision.'' \17\ Finally, 
the court ordered you to pay a $12,000 fine, in addition to 
compensating USAC by paying $115,534 in restitution.\18\
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    \16\ Judgment at 3.
    \17\ Id. A condition of your supervised release includes 
forfeiting all monetary claims pending under contract with other E-
Rate school applicants. Telephone Conversation with Jason Turner, 
Lead Counsel, Dep't of Justice, Antitrust Division (Aug. 10, 2011).
    \18\ Judgment at 5. You were also ordered to immediately pay a 
$100 Special Assessment. Id.
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    Pursuant to Sec.  54.8(b) of the Commission's rules,\19\ upon 
your conviction, the Bureau is required to suspend you from 
participating in any activities associated with or related to the 
schools and libraries support mechanism, including the receipt of 
funds or discounted services through the schools and libraries 
support mechanism, or consulting with, assisting, or advising 
applicants or service providers regarding the schools and libraries 
support mechanism.\20\ Your suspension becomes effective upon 
receipt of this letter or publication of the notice in the Federal 
Register, whichever comes first.\21\
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    \19\ 47 CFR 54.8(a)(4). See Second Report and Order, 18 FCC Rcd 
at 9225-9227, Paragraphs 67-74.
    \20\ 47 CFR 54.8(a)(1), (d).
    \21\ Second Report and Order, 18 FCC Rcd at 9226, Paragraph 69; 
47 CFR 54.8(e)(1).
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    In accordance with the Commission's debarment rules, you may 
contest this suspension or the scope of this suspension by filing 
arguments, with any relevant documents, within 30 calendar days 
after receipt of this letter or after a notice is published in the 
Federal Register, whichever comes first.\22\ Such requests, however, 
will not ordinarily be granted.\23\ The Bureau may reverse or limit 
the scope of suspension only upon a finding of extraordinary 
circumstances.\24\ Absent extraordinary circumstances, the Bureau 
will decide any request to reverse or modify a suspension within 90 
calendar days of its receipt of such request.\25\
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    \22\ 47 CFR 54.8(e)(4).
    \23\ Id.
    \24\ 47 CFR 54.8(f).
    \25\ Second Report and Order, 18 FCC Rcd at 9226, Paragraph 70; 
47 CFR 54.8(e)(5), (f).
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II. Initiation of Debarment Proceedings

    As discussed above, your guilty plea and conviction of criminal 
conduct in connection with the E-Rate program serves as a basis for

[[Page 68762]]

immediate suspension from the program, as well as a basis to 
commence debarment proceedings against you. Conviction of criminal 
fraud is cause for debarment.\26\ Therefore, pursuant to Sec.  
54.8(b) of the rules, your conviction requires the Bureau to 
commence debarment proceedings against you.\27\
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    \26\ ``Causes for suspension and debarment are conviction of or 
civil judgment for attempt or commission of criminal fraud, theft, 
embezzlement, forgery, bribery, falsification or destruction of 
records, making false statements, receiving stolen property, making 
false claims, obstruction of justice and other fraud or criminal 
offense arising out of activities associated with or related to the 
schools and libraries support mechanism, the high-cost support 
mechanism, the rural healthcare support mechanism, and the low-
income support mechanism.'' 47 CFR 54.8(c). Associated activities 
``include the receipt of funds or discounted services through [the 
Federal universal service] support mechanisms, or consulting with, 
assisting, or advising applicants or service providers regarding 
[the Federal universal service] support mechanisms.'' 47 CFR 
54.8(a)(1).
    \27\ 47 CFR 54.8(b).
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    As with the suspension process, you may contest the proposed 
debarment or the scope of the proposed debarment by filing arguments 
and any relevant documentation within 30 calendar days of receipt of 
this letter or publication in the Federal Register, whichever comes 
first.\28\ The Bureau, in the absence of extraordinary 
circumstances, will notify you of its decision to debar within 90 
calendar days of receiving any information you may have filed.\29\ 
If the Bureau decides to debar you, its decision will become 
effective upon either your receipt of a debarment notice or 
publication of the decision in the Federal Register, whichever comes 
first.\30\
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    \28\ Second Report and Order, 18 FCC Rcd at 9226, Paragraph 70; 
47 CFR 54.8(e)(3).
    \29\ Id., 18 FCC Rcd at 9226, Paragraph 70; 47 CFR 54.8(e)(5).
    \30\ Id. The Commission may reverse a debarment, or may limit 
the scope or period of debarment upon a finding of extraordinary 
circumstances, following the filing of a petition by you or an 
interested party or upon motion by the Commission. 47 CFR 54.8(f).
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    If and when your debarment becomes effective, you will be 
prohibited from participating in activities associated with or 
related to the schools and libraries support mechanism for three 
years from the date of debarment.\31\ The Bureau may set a longer 
debarment period or extend an existing debarment period if necessary 
to protect the public interest.\32\
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    \31\ Second Report and Order, 18 FCC Rcd at 9225, Paragraph 67; 
47 CFR 54.8(d), (g).
    \32\ Id.
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    Please direct any response, if sent by messenger or hand 
delivery, to Marlene H. Dortch, Secretary, Federal Communications 
Commission, 445 12th Street SW., Room TW-A325, Washington, DC 20554, 
to the attention of Joy M. Ragsdale, Attorney Advisor, 
Investigations and Hearings Division, Enforcement Bureau, Room 4-
A236, with a copy to Theresa Z. Cavanaugh, Acting Division Chief, 
Investigations and Hearings Division, Enforcement Bureau, Room 4-
C322, Federal Communications Commission. All messenger or hand 
delivery filings must be submitted without envelopes.\33\ If sent by 
commercial overnight mail (other than U.S. Postal Service (USPS) 
Express Mail and Priority Mail), the response must be sent to the 
Federal Communications Commission, 9300 East Hampton Drive, Capitol 
Heights, Maryland 20743. If sent by USPS First Class, Express Mail, 
or Priority Mail, the response should be addressed to Joy Ragsdale, 
Attorney Advisor, Investigations and Hearings Division, Enforcement 
Bureau, Federal Communications Commission, 445 12th Street SW., Room 
4-A236, Washington, DC 20554, with a copy to Theresa Z. Cavanaugh, 
Acting Division Chief, Investigations and Hearings Division, 
Enforcement Bureau, Federal Communications Commission, 445 12th 
Street SW., Room 4-C322, Washington, DC 20554. You shall also 
transmit a copy of your response via email to Joy M. Ragsdale, 
[email protected] and to Theresa Z. Cavanaugh, 
[email protected].
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    \33\ See FCC Public Notice, DA 09-2529 for further filing 
instructions (rel. Dec. 3, 2009).
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    If you have any questions, please contact Ms. Ragsdale via U.S. 
postal mail, email, or by telephone at (202) 418-7931. You may 
contact me at (202) 418-1420 or at the email addressed noted above 
if Ms. Ragsdale is unavailable.
    Sincerely yours,

Theresa Z. Cavanaugh

Acting Chief
Investigations and Hearings Division
Enforcement Bureau

cc: Johnnay Schrieber, Universal Service Administrative Company (via 
email)
Rashann Duvall, Universal Service Administrative Company (via email)
Jason C. Turner, Antitrust Division, United States Department of 
Justice (via email)
Jennifer M. Dixton, Antitrust Division, United States Department of 
Justice (via email)
Meagan D. Johnson, Antitrust Division, United States Department of 
Justice (via email)

[FR Doc. 2011-28683 Filed 11-4-11; 8:45 am]
BILLING CODE 6712-01-P