[Post updated January 2019] Today’s Wall Street Journal says it all. Millions of Americans illegally claimed eligibility to the Lifeline program. Now that the FCC has cracked down on the the eligibility guidelines and misspending, the question becomes who to blame. Is it solely the fault of greedy program participants who lied on applications or did some of the carriers tacitly participate in the fraud by simply turn a blind eye? With billions spent annually on the program, the stakes are quite high.
The Lifeline program was started in 1984 to insure poor Americans had access to emergency services and employment opportunities. The program is funded through monthly surcharges on cell phone bills. In other words, those who can pay subsidize those who can’t. Whether that is even fair isn’t the point of this story. The apparent rampant fraud is the story within the story.
Of 6 million participants, the Wall Street Journal reports that 41% did not meet eligibility requirements or ignored requests for verification. In some states, the cell carriers are limited in their efforts to verify eligibility. But sometimes, carriers simply turn a blind eye. Without the government program and subsidies, many people would not have phones and that means lost revenue for the carriers.
Already, General Communication Inc paid $1.5 million to settle false claims allegations stemming from a carrier it acquired, Alaska DigiTel. The sheer magnitude of the program fraud suggest that other carriers may have problems too.
Under the federal False Claims Act, whistleblowers with inside (non-public) information can bring an action on behalf of the United States. Assuming the government lost money through fraud, the whistleblower becomes entitled to receive up to 30% of whatever is collected.
In the present scenario, if a current or former employee or vendor of a cell phone company can demonstrate that the carriers knew the program was being abused but did nothing, a huge cash award may be forthcoming.
LifeLine Fraud Results in $30 Million Fine!
*We originally wrote this post in 2014 and sure enough, it didn’t take long for whistleblowers to spring into action.
In December of 2016, the Justice Department settled False Claims Act (whistleblower) charges with Total Call Mobile. The company admitted to seeking and receiving reimbursement from tens of thousands of ineligible customers.
Total Call, based in Gardena, California, had enrolled Lifeline subscribers in 19 states and territories. Court records allege that the company, along with its affiliate Locus Telecommunications LLC and parent KDDI America, Inc, “knowingly submitted false claims for federal payments by seeking reimbursement for consumers who did not meet Lifeline eligibility requirements.”
As part of the settlement, Total Call admitted the charges and agreed to pay $30 million. The company also agreed to no longer participate in the Lifeline Program.
In announcing the settlement, Manhattan’s U.S. Attorney Preet Bharara said: “By routinely looking the other way while its sales agents repeatedly engaged in obvious fraud, Total Call Mobile undermined the goals and depleted the resources of a federal subsidy program designed to provide discounted phone services to low-income individuals. While it certified its compliance with FCC rules, Total Call enrolled and claimed federal payments for tens of thousands of consumers who did not qualify for the program.”
An FCC spokesperson said in a prepared statement, “We have no toleration for fraud. This unprecedented $30 million settlement along with a permanent ban from the Lifeline Program affirms our commitment to pursue the strongest sanctions for those who defraud or abuse the Universal Service program.”
What does a $30 million recovery mean for a whistleblower? It means an award of between $4.5 million and $9 million. Not a bad payday for doing the right thing, stopping fraud, and protecting taxpayers.
Call for Lifeline and Telecommunications Whistleblowers
We believe whistleblowers are the new American heroes. They help the government and taxpayers (meaning you and I) save billions of dollars annually. When carriers permit ineligible people participate in the program, the carrier commits fraud. When a participant receives phone service through the program, it means that the government is footing the bill. Increased government subsidies mean increased cell phone surcharges. Both the government and taxpayers lose.
If you have inside information about the Lifeline verification policies and practices of any of the major carriers, give us a call. Our whistleblower lawyers specialize in state and federal false claims actions. If you believe the loss may be $1 million or more, we may be able to help you both stop the waste and earn a reward.
For more information, contact attorney Brian Mahany. Our whistleblower lawyers are involved in a wide variety of cases from cases against phone companies, hospitals, defense contractors, major banks and mortgage lenders. Brian can be reached online, at or by telephone at (direct). All calls are protected by the attorney – client privilege and kept in strict confidence.
Mahany Law – America’s Whistleblower Fraud Lawyers. Our services are available nationwide.
*In January 2019 we published a new in depth section on whistleblower opportunities for telephone and cable companies that misuse the Universal Service Fund monies collected from customers each month. The “USF” is one of the several taxes listed on your monthly phone or cable bill. Monies collected are supposed to be reinvested to upgrade services but some companies merely want to use your tax money to upgrade profits.
Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific fraud topics, just type in the key words such as “whistleblower” in the search bar. We have many informative articles on our site.