Tracfone Made Up "Fictitious" Users To Defraud Taxpayers, FCC

from the ill-communication dept

For decades, big and small telecoms alike have abused the FCC Lifeline program, a fund that’s supposed to help subsidize telecom connectivity for low income users. Started by Reagan and expanded by Bush Junior, the fairly modest program doles out a measly $9.25 per month subsidy that low-income homes can use to help pay a tiny fraction of their wireless, phone, or broadband bills (enrolled participants have to chose one).

On one hand, the program (which you pay into via your telecom bills) genuinely has helped many low income Americans. On the other, the program has routinely been mired in fraud and scandal due to unethical telecom giants, spotty enforcement, and a failure to adequately track how this money is spent.

Case in point: the FCC last week announced it would be fining low cost mobile service provider Tracfone a cool $6 million for making up “fictitious” subscribers in order to nab Lifeline money it wasn’t owned. Some of the fraud was almost comical in its depth and scope, and should have been fairly easy to spot earlier:

“TracFone’s sales agents?who were apparently compensated via commissions for new enrollments?apparently manipulated the eligibility information of existing subscribers to create and enroll fictitious subscriber accounts. For example, TracFone claimed support for seven customers in Florida at different addresses using the same name, all seven of whom had birth dates in July 1978 and shared the same last four Social Security Number digits. The Enforcement Bureau’s investigation also found that, in 2018, TracFone apparently sought reimbursement for thousands of ineligible subscribers in Texas.”

Late last year, the Wall Street Journal also issued a report showing Sprint had allegedly been engaging in this kind of fraud for the better part of the last decade. AT&T also spent years ripping off the program before receiving a wrist slap for the behavior. Like most U.S. regulator enforcement action, the fines usually wind up being a tiny fraction of the money that was gleaned for ripping off taxpayers, users, or competitors for the better part of several decades (see: the FCC’s wireless location data enforcement action). Often, with some elbow grease by lobbyists and lawyers, the fines can be reduced or eliminated entirely.

While cracking down on this fraud is certainly a good thing, there are a few problems here. One, the Trump FCC is focusing on enforcement on this issue because they’re eager to see the program eliminated entirely, despite the fact that the traditionally Republican-created program provides genuine aid to a lot of U.S. low income homes that need it. The Trump FCC already was slapped down by the courts for trying to take subsidies away from tribal areas without providing anything in the way of, well, factual data supporting the move.

The other program is that while the current FCC has cracked down on this kind of fraud (when the evidence is obvious), it has turned a blind eye to oodles of fraud perpetrated on consumers by these same companies. For example the agency did nothing when one major ISP began charging consumers a “rental fee” for hardware they already owned. Nor has the agency ever cracked down on ISPs that use assorted bullshit fees to falsely advertise a lower rate.

So while you’ll see this FCC crack down (sometimes) on fraud to try and discredit a program it ideologically disagrees with, genuine enforcement of fraud remains patchy at best. Especially in the wake of the net neutrality repeal, which further eroded the FCC’s authority to hold giant ISPs to account for a laundry list of bad behaviors that extend well beyond net neutrality violations.

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Companies: tracfone

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Comments on “Tracfone Made Up "Fictitious" Users To Defraud Taxpayers, FCC”

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Anonymous Coward says:

Re: WHO?

The WHO has just issued a communiqué in response to Trump’s latest outburst:

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Meet the new boss
Same as the old boss

catsmoke (profile) says:

Re: Obamaphone Fraud

Fining a shady telecom $6 mil for the telecom’s attempt to sucker $1.2 mil out of the program.

Tracfone did not “attempt to sucker $1.2M out of the project.”

Tracfone paid back $1.2M of the Lifeline money it had illegally collected. That $1.2M was a small portion of Tracfone’s total theft. The proposed $6M fine is based on evidence collected on Tracfone’s misdeeds in states (Florida and Texas), over the second half of 2018. But in 2018, Tracfone was paid Lifeline money for the entire year, for 42 states.

Given the population of Florida and Texas, and assuming that those remaining 40 states have an average share (relative to the US total) of the cell phone market, then we can estimate that the $6M fine is based on about 10% of Tracfone’s illicit Lifeline gains in 2018. (Florida and Texas combining for 50M people, out of the 42 Tracfone-covered states having an estimated 269M people, and the fine only addressing one-half year of Tracfone’s illegal Lifeline gains in those two states where evidence was collected.) Based on this alone, Tracfone probably deserved a $60M fine, for their 2018 violations.

It is preposterous to maintain Tracfone is facing a potential fine that is five times as large as the amount Tracfone illegally acquired through the Lifeline program. The $6M fine is a pittance, next to Tracfone’s career illegal Lifelife haul.

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