By Christopher Cole

A Montana wireless carrier faces a proposed fine of more than US$660,000 for allegedly failing to disclose to the Federal Communications Commission that it was indirectly controlled behind the scenes by foreign nationals, including citizens of Russia and Cyprus.

The FCC voted unanimously at an open meeting Thursday to issue the penalty against Truphone Ltd. for “apparently exceeding statutory limits for ownership by foreign individuals or entities holding equity or voting interests” in licenses without commission approval.

FCC commissioners said the enforcement action fits with agency efforts to beef up US network security by making sure the federal government is aware of substantial foreign stakes in telecom firms, and this case reflects a need to keep track of existing licensees.

The planned penalty, which comes with a demand that Truphone promptly issue a corrective filing of ownership, stems from a company notice to the FCC dating back more than a decade in which the company informed the FCC of a change in control of more than 25 per cent.

The commission alleges that over several years, the ownership of Truphone and control of its FCC licenses were transferred repeatedly to foreign individuals and entities without legally required disclosures to the FCC. The FCC noted that even after an initial ownership stake exceeding the cap has been approved, subsequent approvals are required before any additional foreign individual or entity acquires a stake of more than a 5 per cent or greater direct or indirect equity or voting interest in the entity.

According to the FCC, “Truphone failed to accurately report its ownership structure and obtain prior approval before vesting control of the company in its current owners, and also failed to obtain Commission approval before an unvetted foreign individual/entity acquired more than five percent of Truphone.”

The company’s apparent repeated violations “reflect … the company’s cavalier attitude toward FCC rules and screening mechanisms to determine national security and law enforcement risks associated with foreign investment,” the commission added.

The FCC claimed that Truphone’s actions meant that control passed to foreign entities that were not vetted for compliance with FCC rules or subject to review for national security, law enforcement, and foreign or trade policy concerns.

FCC Chairwoman Jessica Rosenworcel said telecom companies must keep the commission up to date regarding their ownership structure.

“Across the federal government, there has not been enough oversight to safeguard our networks against evolving threats after the issuance of a license. After all, our interest in security does not stop with a one-time grant of authority,” she said. “We need to regularly review what has come before to ensure that every service provider subject to the Communications Act complies with the law.”

Truphone’s corporate office could not be reached for comment last Thursday.

FCC enforcers said in Thursday’s meeting that commission approval was required after the 2011 change-of-control filing of more than 25 per cent ownership by dual citizens of Russia and Cyprus. But after the transaction, those foreign nationals did not control the voting interests in the company, as control resided with two trusts held for their benefit whose trustees were Cypriot citizens, the officials said.

Truphone operated this way for eight years before another filing in 2019 disclosing ownership changes, the FCC said. Commission staff said in a press call Thursday that the proposed fine was triggered by the initial 2011 filing that the agency found erroneous.

FCC Commissioner Geoffrey Starks said just after the 4-0 vote to proceed with the enforcement action — formally called a notice of apparent liability for forfeiture — that “network security is national security.”

“Even before Russia’s invasion of Ukraine, the United States and other democracies around the world were reassessing their policies toward entities affiliated or otherwise subject to the jurisdiction of adversary states,” he said, noting other actions the US government has taken, such as the effort to “rip and replace” Chinese telecom equipment.

“Today’s action provides another example of how the commission’s actions must work to ensure that our networks are as secure as possible,” he said. “This case involves a small Montana wireless carrier that has been indirectly owned by a group of Russian oligarchs since at least 2011. While it doesn’t appear that these individuals are currently subject to any US sanctions, they have been targeted with sanctions overseas.”

Starks said the licenses at issue “have undergone a bewildering number of changes and ownership over these years, but at all times have been ultimately controlled by these oligarchs and their representatives.”

The FCC said that any corrective filing could be referred to the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector, known informally as Team Telecom.

–Editing by Patrick Reagan.