Company fined $51 million over alleged abuse of phone subsidy program

Company fined $51 million over alleged abuse of phone subsidy program
© Thinkstock

The Federal Communications Commission is trying to fine a mobile phone carrier $51 million over accusations that it fraudulently enrolled tens of thousands of individuals for free service through government subsidies. 

The proposed fine is the largest amount the FCC has ever sought for abuse of the federal Lifeline program. The announcement appears timed with a major overhaul of the program, which is partly aimed at cutting down on that kind of abuse. 

ADVERTISEMENT

The company Total Call, over the past four years, is accused of receiving millions of dollars from the government by signing up ineligible customers or signing up the same customer multiple times. 

The FCC accused the company’s management of turning their heads as more than 800 sales agents used the questionable tactics. 

In addition to the fine, the FCC is considering banning Total Call from participating in the phone subsidy program, which was recently updated to subsidize Internet service as well. 

“In addition to today’s proposed fine and in light of the egregiousness of the conduct alleged, the Commission indicated in its formal notice that it may initiate proceedings to revoke Total Call’s authorizations to operate as a Lifeline provider and a common carrier,” the agency said. 

The FCC’s vote last week to expand the Lifeline program to Internet service also included a number of reforms. The largest was the creation of a national database where providers must verify whether individuals are qualified for the program by cross-referencing information from other low-income programs like Social Security, Medicaid and food subsidies.

In the past, providers themselves were responsible for verifying whether a person was eligible for the program. That gave incentive for abuse. FCC Chairman Tom Wheeler described the old system as the fox guarding the hen house. 

When the program expanded to cover basic cell service in 2008, it saw a sharp uptick in fraud and abuse, leading to further reforms in 2012.

Because much of the fraud happened during President Obama’s first term, it was derisively branded as “Obamaphone,” though the program has been around since the Reagan administration and the cellphone update started during the Bush administration. 

The government subsidies are paid for by phone companies, which charge extra fees to customers.