Interagency Investigation into VRS Fraud Ends in 26 Arrests
The FCC said it’s tightening oversight of video relay services (VRS)after the Justice Department charged 26 people with stealing more than $50 million total from the video relay service program. After a joint investigation by the FBI, U.S. Postal Inspection Service and the FCC Office of Inspector General, FBI agents and postal inspectors made arrests Thursday in New York, New Jersey, Florida, Texas, Pennsylvania, Arizona, Nevada, Oregon and Maryland, Justice said. Meanwhile, VRS provider Purple Communications said it expects its Q3 revenue to dive $7.2 million from a year earlier unless the FCC loosens its compensation rules.
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The department arrested owners and employees of Viable Communications of Rockville, Md.; Master Communications of Las Vegas; KL Communications of Phoenix; Mascom of Austin, Texas; Deaf and Hard-of-Hearing Interpreting Services of New York and New Jersey; Innovative Communication Services for the Deaf of Miami Lakes, Fla.; and Deaf Studio 29 of Huntington Beach, Calif. The indictments seek criminal forfeiture from all the defendants, the department said.
The defendants “are alleged to have generated fraudulent call minutes by making it appear that deaf Americans were engaging in legitimate calls with hearing persons, when in reality, the defendants were simply attempting to steal money from an FCC program that is funded by every single American who pays their telephone bills,” said Lanny Breuer, assistant attorney general of the department’s criminal division.
“Today’s events represent both a tragedy and an opportunity,” said FCC Chief of Staff Edward Lazarus. “The tragedy is the unfortunate truth that a significant number of unscrupulous individuals, at great cost to the nation, have preyed on a very important program for delivering essential telecommunications services to persons with hearing disabilities. The ‘opportunity’ is the chance to reiterate our commitment to the VRS program and to follow through on efforts, already begun at the FCC, to safeguard the program against further waste, fraud, and abuse and to improve its delivery of VRS services to consumers.”
The FCC has “substantially tightened” oversight of the VRS program this year, “working with the current outside administrator of the program to increase the scrutiny on call records and identify and act upon irregularities,” Lazarus said. As a result, the commission withheld payment on 2 million minutes of questionable VRS calls, he said. And the FCC “is in the final stages of completing a competitive process for selecting its next TRS Fund Administrator,” Lazarus said. “The new Administrator will operate under much stricter control, including a new auditing regime, to guard against the kind of waste, fraud, and abuse that previously plagued the program.”
Purple said it expects its revenue to drop because the FCC hasn’t allowed it government money for “certain internal multi-party calls that may or may not have involved a hearing individual.” In a filing last week at the Securities & Exchange Commission, Purple said it recorded $35.7 million revenue in Q3 2008 but may get $28.5 million for the period a year later. “The reduction in revenues is primarily attributable to the Company not recognizing revenues associated [with] such conference calls,” it said. A company spokeswoman said she couldn’t comment by our deadline.
The FCC in September denied a Purple petition asking the commission to confirm that companies may receive payment for all multi-party calls, regardless of whether a hearing person is on the call. But the FCC said ,"VRS calls not involving a hearing individual unambiguously are not compensable under current law.” Purple has another petition at the FCC related to the calls.