FCC Proposes Record Fine for Violating Lifeline Rules
The FCC proposed the biggest fine ever for a Lifeline violation, $51 million, against Total Call Mobile for allegedly enrolling tens of thousands of duplicate and ineligible consumers into the program. The FCC also ordered the company to explain why the agency shouldn't suspend it from the Lifeline program. One commissioner from each party said the proposed fine is too small. Commissioner Ajit Pai alleged that Chairman Tom Wheeler kept the order under wraps until after a vote on Lifeline overhaul. Total Call didn’t comment on the notice of apparent liability.
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The FCC alleged that since 2014, Total Call requested and received an estimated $9.7 million in improper payments through the USF program for 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 NAL was released Thursday night.
Total Call officials were aware of a “systematic problem of duplicate enrollments” as early as November 2013, a year before the USF administrator raised the issue with the company, the FCC said. During Q4 2014, 99.8 percent of Total Call’s Lifeline enrollments involved overriding the third-party verification system designed to catch duplicate enrollments, the agency said: Sales agents shared eligibility documents, including Supplemental Nutrition Assistance Program (SNAP) cards, to do multiple enrollments.
“We reserve the strongest sanctions for those who defraud or abuse federal programs,” said Enforcement Bureau Chief Travis LeBlanc in a news release. “Any waste, fraud, or abuse in the Lifeline program diverts scarce funds from the consumers they are meant to serve and undermines the public’s trust in the program and its stewardship.” An FCC spokesman said the agency doesn't discuss whether a case might be referred to another law enforcement agency for criminal prosecution.
Pai dissented in part. Even though the investigation was largely wrapped up against Total Call in mid-2015, Wheeler's staff kept the NAL on hold until March, Pai said. “Even then, Commissioners were told that the Notice of Apparent Liability could not be released or publicly discussed until April 1, 2016, conveniently one day after the Commission was scheduled to expand the Lifeline program to broadband,” Pai said. “That’s not right.” On March 31, at a contentious monthly meeting, commissioners approved a Lifeline reform proposal 3-2, over dissents by Pai and Commissioner Mike O’Rielly (see 1603310056).
The NAL also “repeatedly gives Total Call Mobile the benefit of the doubt,” Pai said. “For example, it treats less than 10 percent of Total Call Mobile’s subscribers as likely ineligible when we have evidence that up to 99.8 percent were. Using that metric of likely ineligibility … would yield a forfeiture amount of roughly $84 million, in line with what we should have proposed two years ago.”
There's no connection between the Lifeline reform order and the timing of the Total Call NAL, an FCC spokesman said, responding to Pai. The company produced tens of thousands of pages of documents in December that needed to be addressed, the spokesman said.
Commissioner Mignon Clyburn only concurred on part of the order, saying the proposed fine is too low. “Total Call Mobile’s actions were, in a word, reprehensible,” she said. The company’s actions were “fraud, plain and simple and represents the very reason why the Commission just voted to eliminate Lifeline providers from determining a customer’s eligibility,” Clyburn said.
O’Rielly, in a partial dissent, said the order shows the problem with using temporary SNAP cards to enroll consumers who weren’t eligible for subsides. Some say a national Lifeline eligibility verifier would help address Lifeline fraud, he said. “However, it will be years before the National Verifier is operational and, even then, the Lifeline program will continue to be marred by underlying fraud in the SNAP program. At best, we will be throwing good money after bad.”
Unlike Pai and Clyburn, O’Rielly said the fine is likely too large. “Once again, the Commission goes down the path of proposing a very large fine that does not appear to be fully supported by the law and Commission precedent,” O’Rielly said. “I have questions about whether all of the conduct falls within the statute of limitations period. Perhaps it eases the conscience of a Commission that is in the process of greatly expanding the size of the Lifeline program to be able to point to aggressive enforcement actions and hefty fines.”