The Federal Communications Commission is planning to collect a $51.1 million fine from a phone company accused of using “widespread enrollment fraud” to collect improper payments from a program designed to help poor people.
Since 2014, Total Call Mobile (TCM) has requested and received $9.7 million in payments by signing up tens of thousands of duplicate or ineligible consumers “despite repeated and explicit warnings from its own employees, in some cases compliance specialists, that company sales agents were engaged in widespread enrollment fraud,” the FCC said in an announcement yesterday.
The alleged fraud targeted the Lifeline program, which provides discounted phone service to people with low incomes. Lifeline, part of the Universal Service Fund, is paid for by US residents through surcharges on phone bills.
The FCC said its investigation into Total Call found that the company used numerous tactics to collect fraudulent payments, and more than 800 Total Call sales agents engaged in improper enrollment practices in at least 13 states. The FCC’s Notice of Apparent Liability accused Total Call agents of “surreptitiously recording consumers’ identifying information, enrolling individual consumers for multiple phones without their knowledge, and falsely claiming that ineligible consumers met the requirements to participate in the Lifeline program.”
Sales agents would enroll customers more than once by making slight changes to a consumer’s identifying information, the FCC said. Sales agents also allegedly enrolled ineligible customers by using “temporary Supplemental Nutrition Assistance Program (SNAP) cards,” which contained no name or other identifying information. A single SNAP card could be used to enroll multiple ineligible consumers and collect government subsidies, the FCC said.
The FCC's "Universal Service Fund Strike Force" interviewed Total Call employees and conducted some undercover detective work. In one case, an FCC employee approached a Total Call sales agent at a tent advertising Lifeline cellular phones.
The FCC employee told the sales agent “that s/he sought to obtain a Lifeline cellular phone through TCM, but that s/he had neither an identification nor an eligibility document,” the FCC wrote. The sales agent assured the FCC employee “that s/he could nonetheless obtain a Lifeline cellular phone through TCM because [the sales agent] possessed extra SNAP cards that could be used as the requisite eligibility document.”
TCM had an internal sales agent help line staffed by employees who “advised agents on how to get around or disguise defective identification or eligibility documentation for applicants,” the FCC said. Help line employees told agents how to obscure information on identification and eligibility documents to hide portions that would show customers did not qualify for Lifeline subsidies, the FCC said.
“In one instance a help line employee counseled a sales agent to put his or her finger over the word ‘void’ on an eligibility document,” the FCC said. This tactic would be used when sales agents signed up customers in person and took photographs of IDs to record eligibility information.
In another case, “one sales agent used the identification from a stolen wallet to register 10 Lifeline cell phones in the name of the wallet’s owner without his/her permission,” the FCC said. “When that agent was arrested and charged with identity theft, he/she possessed not only the wallet but 12 additional Total Call-issued Lifeline cell phones.”
Total Call used a third-party vendor to facilitate enrollment of Lifeline customers, but generally it overrode systems designed to prevent fraud, the FCC said. The vendor, CGM, provided an electronic platform that transmitted enrollment information to the National Lifeline Accountability Database (NLAD).
But Total Call employees allegedly used an “override function” to bypass denials. In the fourth quarter of 2014, “99.8 percent of Total Call’s enrollments nationwide involved overriding the third-party verification system designed to catch duplicate enrollments,” the FCC said.
Total Call can contest the proposed fine to the FCC in what can be a lengthy process. The commission proposed a $100 million fine of AT&T related to throttling of unlimited data in June 2015, but that case still hasn’t reached a final resolution or settlement. We contacted Total Call today but haven't heard back yet.
FCC Commissioners Mignon Clyburn and Ajit Pai argued that the FCC should have proposed a larger fine. “Given the egregious nature of the alleged conduct, I believe a more significant forfeiture would have been appropriate,” Clyburn wrote in a statement. Clyburn approved the FCC's decision in part and concurred in part.
Pai approved in part and dissented in part, writing that the fine of $51 million “is not even a third more than the $38,933,139 that Total Call Mobile has collected from the Universal Service Fund since its misdeeds were exposed. That’s hardly the type of justice the American people deserve given the sheer magnitude of misconduct at issue.” Pai was referring to the total amount TCM collected, including both legitimate payments and allegedly fraudulent ones.
Commissioner Michael O’Rielly argued that the FCC exceeded its authority, writing that it has “propos[ed] a very large fine that does not appear to be fully supported by the law and Commission precedent.”
The FCC's Notice of Apparent Liability said the $51.1 million penalty "reflects the seriousness, duration, and scope of TCM’s multiple apparent violations." It's the largest fine the FCC has ever proposed against a Lifeline provider.
The Lifeline program, founded in 1985 and expanded in 2005 to cover mobile phone service, is undergoing some changes. The FCC last month approved a plan to let Lifeline subsidies cover Internet service in addition to voice and to create an independent entity that would verify subscriber eligibility in order to reduce fraud. The national verifier will impose stronger safeguards than the existing National Lifeline Accountability Database.