Court Rules False Claims Act Whistleblower Provisions Constitutional

In a significant legal development, a Wisconsin federal judge has rejected telecommunications provider Wisconsin Bell’s attempt to dismiss a whistleblower lawsuit alleging the company overcharged schools and libraries for internet services through the federal E-Rate program.

The ruling centers on Wisconsin Bell’s novel legal argument that the False Claims Act’s qui tam provisions—which allow private citizens to file lawsuits on behalf of the government and share in any recovery—are unconstitutional. The judge firmly rejected this constitutional challenge, allowing the whistleblower’s case to proceed.

The E-Rate program, administered by the Federal Communications Commission, provides discounted telecommunications services to eligible schools and libraries across the United States, particularly benefiting institutions in disadvantaged and rural communities. The program disburses approximately $4 billion annually to ensure educational facilities have affordable access to broadband and other connectivity services.

According to court documents, the whistleblower alleges Wisconsin Bell, a subsidiary of telecommunications giant AT&T, systematically overcharged educational institutions for services provided under the E-Rate framework. The complaint suggests the company failed to offer the lowest corresponding price for services as required by program regulations, potentially resulting in millions of dollars in improper charges to both the institutions and the federal government.

The case represents one of several recent challenges to the E-Rate program’s implementation. Industry watchdogs have increasingly scrutinized telecommunications providers’ pricing practices for schools and libraries, with several similar lawsuits pending in other jurisdictions.

Legal experts note that Wisconsin Bell’s constitutional challenge to the qui tam provisions represents an increasingly common defense strategy. Companies facing whistleblower lawsuits have recently intensified efforts to attack the legal framework of the False Claims Act itself rather than simply contesting the factual allegations.

“This ruling reinforces the viability of the False Claims Act as a critical tool for combating fraud against government programs,” said Eleanor Winthrop, a professor of regulatory law at Northwestern University. “The qui tam provisions specifically enable insiders with knowledge of fraudulent billing practices to come forward when they might otherwise remain silent.”

The False Claims Act dates back to the Civil War era but has been significantly strengthened in recent decades. It allows whistleblowers, known as “relators,” to bring lawsuits on the government’s behalf and receive between 15-30% of any recovered funds. In fiscal year 2023 alone, qui tam cases resulted in over $2.3 billion in settlements and judgments, with education and telecommunications fraud representing growing categories.

For Wisconsin’s educational institutions, the case holds particular significance. Rural schools and libraries often depend heavily on E-Rate subsidies to maintain adequate internet connectivity for students and community members. Overcharges within the program can directly impact these institutions’ budgets and technological capabilities.

Wisconsin Bell has declined to comment specifically on the ruling, but company representatives have previously stated they remain committed to compliance with all E-Rate program requirements and will vigorously defend against the allegations.

The Department of Justice, which has the right to intervene in qui tam cases, has thus far monitored the proceedings but not actively joined the lawsuit. However, DOJ officials have expressed increasing interest in E-Rate compliance issues nationwide.

The case will now proceed to discovery, where the whistleblower’s specific allegations will be examined in greater detail. Legal observers anticipate the litigation could extend well into 2026, potentially establishing important precedents for telecommunications pricing transparency and whistleblower protections.

This case represents part of a broader trend of increased scrutiny on government contractors across multiple sectors, as federal spending on infrastructure and connectivity programs has expanded significantly in recent years.