On Tuesday the Federal Communications Commission (FCC (News - Alert)) purposed fines of $14.4 million on five wireless service providers for allegedly defrauding a federal phone subsidy program.
The program Lifeline was created to ensure low income family households were able to have mobile phones for contacting families, employers and emergency services. A recent review of the program, which was conducted by the Wall Street Journal, discovered that 41 percent of the more than six million users who benefitted from the program were unable to prove their eligibility or they failed to answer requests for verification from their carriers.
In 2012, the United States government put close to $2.2 billion into the program.
The FCC accused TracFone Wireless, Icon Telecom, Assist Wireless, Easy Wireless, and UTPhone all of defrauding the system. The accusations state that the programs knowingly signed thousands of consumers to multiple subsidies despite rules that permitted only one subsidy per person.
Mignon Clyburn, acting FCC chairman, said, "Collecting support for duplicate Lifeline service - the practice we address in these cases - is not only illegal, it diverts resources from legitimate users of the program and is unquestionably within the power and duty of Lifeline providers to prevent. It must stop."
Mexican billionaire and owner of TracFone, Carlos Slim, denied breaking any FCC rules.
"We do not believe that our conduct violated any rules or that the proposed FCC action is warranted,” he said. “We believe that we have the most sound program in the industry when it comes to wireless Lifeline."
TracFone released the following statement:
Last night, we learned that the Federal Communications Commission (FCC) is disputing TracFone Lifeline wireless billing involving less than $8,000 and involving fewer than 850 people. With almost 4 million Lifeline customers, obviously this is a very small percent.
We will respond to the FCC at the appropriate time. However, we do not believe that our conduct violated any rules or that the proposed FCC action is warranted. We believe that we have the most sound program in the industry when it comes to wireless Lifeline. TracFone has been a leader in both innovative wireless Lifeline services and in preventing program abuses. We have proposed many reforms to prevent waste, fraud and abuse of Universal Service Fund resources. Some of those proposals were included in the FCC's 2012 Lifeline rules. And TracFone continues to propose additional fraud prevention measures including a ban on in-person distribution of handsets associated with Lifeline services.
Our goal at TracFone Wireless has always been to do whatever it takes to clear up any such issues as expeditiously as possible. We will have no additional statement on this matter until we submit our response to the FCC.
In January of 2012, the commission adopted reforms that mandated Lifeline subscribers had to show documentation about their income and their carriers are required to re-certify them each year.
Edited by Alisen Downey